I like Crysis 2 quite a bit. I have been pleasantly surprised by it overall.

However, the multiplayer makes me want to commit seppuku. The suit powers are pretty cool once you get the hang of them, but the weapons and damage system is completely whack.

I can not even begin to count the number of times that I have been in Armor mode, ambushed a player in Stealth, and still lose the engagement. I die in 2-3 shots while it I sit there pumping 10-20 rounds into him. This has happened in hundreds of different situations with many different weapons (even when I have the Feline which is way overpowered it still happens). I know I am hitting them due to the telltale "smack" noise it makes when your bullets connect. I always aim for the upper torso as well, so damage-wise it has to be doing something fierce.

The damage system is so inconsistent as to make Crysis 2 multiplayer damn near unplayable.

It can not be lag b/c I play on a strong connection that works fine w/ every other FPS online. I have heard the same complaint from pretty much everyone I have played online with. Am I doing something completely wrong?

I play on XBox 360.

If you say it isn't lag then its hit box issues. Both are commonly reported issues. I would tell you to add it to the stickied list of issues but every other post is about either one of the issues. Either stick it out and wait for a patch or dump the game. The only real options we have right now.

I see this issue very often.
It also appears when i try to make headshot with my DSG-1 through scope. Some time precise shot have no affect to the target or simply do normal damage (but headshot must kill with one shot in any suituation).
Here is something wrong with hitboxes.