One has to remember that the main point of games is fun through mainly escapism.
Thus, a degree of realism is sometimes good, but too much is dull or at times frustrating.
Driving/racing games can get away with a lot of realism because most people would never be able to drive these cars at these speeds around these tracks. However, there is a point where it does become "too realistic".
This actually applies to a lot of arts and literature.
When I got my first job in the games industry, my task was to program the AI for enemy planes in the PS1 game "Top Gun: Fire at Will". It took me a month to get planes to avoid running into the ground, and another month to get them to get fairly good at maneuvering behind the player to line up for a shot. Once we were happy with it, we brought in the first set of playtesters for a focus group.
The feedback was pretty unanimous: "This game is boring. Where are the other planes?"
Of course, the other planes were all behind them, lining up for shots on the player. However, they weren't visible on screen, so the player's experience (especially for novices) was a poor one.
As a result, we revamped the AI such that, at the beginning levels, fully 80% of the time the enemy planes were doing their best to get in front of the player so they could be shot down (we called this "become target mode"), while only 20% of the time were they actually trying to shoot down the player ("acquire target mode"). They would switch modes frequently, so there was plenty of action even if the player sat there flying straight and level.
The great game designer Sid Meier put it another way "The user is your buddy: be good to him." He said this when explaining why computer opponents would never be the first to use nuclear weapons in his game Civilization, even when threatened with extinction. He described it as the equivalent of the computer tipping over the chessboard when faced with a losing situation.
The point is this: the main goal of the game is to entertain the player, not to be the best and most accurate simulation possible. Some players find accurate simulation to be fun, and so striving to create a foundation as realistic as possible can be a goal in and of itself, provided you don't sacrifice the goal of entertainment for the average player.
I personally think that PD has done a remarkable job of balancing these two, giving the hardcore sim-heads a more realistic simulation, while still leaving the game accessible to the average player. I trust that the implementation of damage will follow a similar vein.
