But we can keep the rule that everyone needs to have a weapon..
The problem is that making running around with fists this good is implicitly weakening the "NOT OK: Running around without no weapon." rule.
It would be a little like the Department for Road Safety announcing that all cars must be fitted with gigantic spikes on the front bumper. This would create much dissonance in people who think that the point of the rules is to keep the roads more safe. Furthermore it will look like the DfRS has no idea what they actually want and are incompetent. They will lose a lot of credibility.
You could both keep the rule and make fist fighting viable, but then you would also make enforcing the rule very hard as people could just say that they had their weapon stolen. What can the admin do then? Kick anyone who looks guilty?
And rules that can't be enforced aren't really rules at all. The resulting disregard for the rules will weaken all the rest of the rules as well.
As a final result, we will probably get significant numbers of people spawning with a practice dagger, dropping it and going to chamber people out of their weapons. This would make cRPG look more like a weird Shaolin monk training session than medieval warfare. And render Heavy Gauntlets the best weapon in the game.