You would have to give every object in the game that was not far heavier than the heaviest warhammer a damage, a reach, an animation (many or most wouldn't work with just any animation, there would need to be adjustments), a speed, health etc. (and can you use them for non-weapon purposes when they break? Do they just dissapear? There's a million factors here. Plus all the skill and how to implement it into the current system. I don't think it could work.
Atleast not yet, but technology is evolving faster than the humans, maybe in the close future games would be so epicly in depth that you don't separate them from real world, who knows. It could work, it would just take a very long time to program them all and get the animation right. But think how much more fun the H2H would be!
I just fought this nasty goblin skrimisher in a fort in Oblivion, hand to hand, and I wished I would have been able to take the Ale bottles on the chest and throw them/destroy them and make them sharp glass edged non-weapon weapons. :toughninja: