I notice that any mod that edits the object script on the player conflicts with Nehrim. Basically the mod will stop the level up system that works on the player. Is there a way to allow both scripts to work on the player? Maybe dynamically putting one on the player at runtime in with obse?

Assuming you need to attach it directly to the player in order to use block types like OnHit, OnMagicEffectHit, et al, you can consider using OBSE's event handlers instead. They are currently only available in the beta, though/
If that's not the case then attaching it to the player probably isn't necessary.

Slightly off topic, but would checking health every frame and checking to see if it was lower than it was last frame within gamemode work as a sort of ghetto "onhit?" For damage dealing things of course.

It wouldn't detect hits which do no damage, or no net damage (e.g. player has some spell/ability that regens health, gets hit for same amount, no net damage).
It would detect damage from things other than being hit (scripts, magic effects, falling, etc).
So it depends on your definition of "ghetto".

Thanks, it was an onhit issue. Btw, your onhit function has worked greatly.