If SquareSoft's 4th game for PSOne, Bushido Blade, could do it in 1997, I have every confidence that the devs of our cherished simulator could pull it off fairly close to perfection. Even if this is only an idea that gets implemented into the next generation of midieval ground combat sims, I think it is well worth looking into.
You are missing the point, that game was developed to be that way regardless of the date it was made, Warband wasn't developed with those features in mind, the only locations on your player are head which includes the neck, then the body counts as everything all the way down to the knee, including your arms. Which means you have 3 hit locations only, getting hit in the thigh would have the same effect as being hit in the arm.
Sadly, locational damage is most likely be very limited by the engines hard-coding itself. Regardless of what chadz can code himself, hard-coding implies coding that cannot be altered by anyone but the developers of the game, which usually requires alot of work.
That's just how I imagine it anyway, I could be wrong, but I don't see this feature going very far for Warband. But yeah I also highly doubt anyone developing next gen medieval combat games are going to come and read cRPG forum for ideas lol.