Think about it,blocking an axe with your arms....all thats gonna happen is your arms getting chopped off or get a really big gash,unless you wore bracers.
Horrible range,correct me if Im wrong but you get more range with a dagger,and not to mention punching a Dragon from the sky wouldnt make sense unless it had an animation of you literally jumping on it,hanging for dear life as you furiously poke your finger in its eye xDDD That would be funny.
And how exactly would you fight a bear with nothing but hands? I mean I know this isn't real life but.....you get the point ;P
But lets say if it was a full blown fighting mechanic,how do you think it would work? Would perks be different fighting styles? Hapkido? Mui Thai? Wrestling? Boxing?
Perk that allows a Haymaker that stuns someone for 10secs.....
Weighted Blows,that would allow each punch to stagger the enemy or give a certain chance to stagger?
Fist of the North Star? People would just instantly explode? LOL
It would of been cool to snap peoples necks or other things though but....when you bring some arrows,a fire spell,and a warhammer into the fight,hand to hand pretty much becomes obsolete.
Atleast,thats my opinion.
Well, there is some role-playing potential behind having hand-to-hand as a skill. It would have to be limited in some situations as you have pointed out, but I think it would be very possible to implement if it was connected to the schools of magic. In the lowest levels it's merely punching, but could become a power by which you can surround magic around your hands. This energy would be used to inflict more damage, and can deflect enemy attacks. It wouldn't be your hands blocking, but the magic around those hands. You could also have all the touch-spells delivered through hand-to-hand combat. This system would be extremely enjoyable if you could direct your blows to different parts of a person's body. It would also be great with different dodging techniques along with the ability to kick.
It would be really hard to implement and if they did it well, it would would take some of the intended atmosphere away from the game, and of course, the time needed to improve more important aspects of the core combat system. Also, with my example, those things could be done with pure magic, you just don't have the physical combat, but I think it would fit well to some degree.
P.S, This isn't a sensitive topic, it's overly sensitive people who can't talk about a game with other people. I also think it's rude to make posts intended to mock the OP's choice of topic and tear down their intention to discuss that topic.