Hopefully they'd reduced the effectiveness somewhat. Bringing a fist to a swordfight is a good way to get cleft in twain.
I'd actually say the effectiveness should be increased, because in past games, hand-to-hand was really rather useless, and while technically, it's realistic that using your fists wouldn't be the best option when fighting against enemies armed with bows and swords, this is a video game, it doesn't necessarily have to be realistic, I don't play the Elder Scrolls for a simulation of real life, I play it to be entertained. Also, the Elder Scrolls is an RPG, a role-playing game, in other words, it's a game where you define a character, and then role-play that character. This is relevant here because usually, an RPG is expected to allow players to choose multiple different play styles, and it needs to ensure that the different play styles are viable. If I choose t role-play a character who uses hand to hand as his primary means of offense, I expect to be able to survive doing so, otherwise, what's the point of even letting me make such a character? In short, if hand to hand will not be a viable play style in Skyrim, than there's no point in having the skill at all.
In any case, we don't know if hand to hand is in the game or not, it's true that it wasn't mentioned in the pod cast, but a lot of skills weren't mentioned, does this mean they're not present? I think it's too early to draw any conclusions yet, I'm taking a "wait and see" approach to this issue.