This has already been done before, and quite well I might add. So again I reference you all to the ever brillaint Vagrant Story. There was no dismemberment or anything. Your character had a central hp that if it ran out, you died, simple. When striking and being stuck by enemies you chose an area to attack. Areas would take damage and if they took to much damage it would affect the character appropriately. Damage to the weapon arm reduced attack power severley, and shield arm was worthless, legs reduced move speed, and I forget the others, I\'d have to look it up.
This wasn\'t just for humans though, it was applied to every enemy in the game, although smaller creatures were just a single target. The cool part is different areas have different higher risk/reward rates for hitting them. Hitting a head is obviously going to hurt more, but is much more difficult to hit. Also you can do more damage by hitting multiple areas.
I\'m not sure about the how well the healing would work though. In Vagrant Story you recovered hp over time, but had to use a healing item or spell to recover wounds (along with hp of course).
I don\'t know how well this would work in the seemingly real-time combat system of the game (Vagrant Story was real-time but paused when you went to attack), but it was very cool. The range system for weapons where a sphere extended out to show your weapon range was cool too. And the real-time environment where if an obstruction or other enemy was in the way you would hit that instead (and vice-versa, hilarious when an enemy accidentally hits another).
OK I\'m done rambling, hope that made some sense, and Vagrant Story rules, you must all play it.