The reason unarmed was boring and week was because it was just boxing-lite. No kicks, no grappling, no crippling attacks (they BETTER have Fallout 3's body damage system), etc. How is unarmed supposed to be dangerous when it isn't even close to the strength it has in real life? I should be able to grab my opponent's arm, twist and break it, then plant my boot in their ass. This is a fight to the death, not a boxing match.
I have to agree. I'd say unarmed could be fun and worth using, past games just didn't handle it very well, it didn't do enough damage to be worth using on that alone and didn't have enough in the way of other benefits to make up for that. I mean, in Morrowind, unarmored could knock people out pretty quickly when you were skilled at it, but you still needed to hit them thirty times afterwards before they'd die, and since the knockout effect from hand to hand was short lived and you couldn't use it to cripple people without killing them, it didn't provide a non-lethal option for combat either. It was also pretty boring considering that you'd just punch people, and punch them, and punch them, no variety in combat moves or anything, at least with other weapon skills, you can get better weapons as you play, when you don't have any weapons, making combat feel less repetitive would require more variety in combat moves.
For unarmed combat to be useful, if you don't want to take the easy way and make it as deadly as swords or axes, you have to give it some other advantage to make it worth considering as an alternative, perhaps allowing it to be used as a non-lethal combat option. Just removing the weight of your weapons isn't enough of an advantage. We don't know if it's in Skyrim or not yet, but if it is, I defintely hope it's improved, in past games, I just didn't feel like it was worth using except for the novelty, which quickly wore off once you realized you'd be throwing the exact same punches for the entire game.
How would kicking make something magical?
Well, it doesn't literally make it magical, of course, but being able to kick people would at least add a bit more variety to unarmed attacks, since it's no longer just punching.