I don't think it would work out well. Even with the current (and previous) system of gold/xp gain, which doesn't reward individuals for their kills or damage done, I see multiple people all running in to kill one guy, with archers firing at him too - presumably just to add another kill to their k/d ratio. If you give even further reward for killing/damaging, this will happen every time. People are duelling, one player's team will run in swinging wildly trying to get the kill, often damaging each other and the player in the process, while an archer will shoot into the battle, occasionally hitting the enemy, occasionally their team mates. If you decide to counter this by bringing in negative gold/xp for killing or damaging a team mate, the game will become even more hate filled: if you accidentally run in front of an archer (who was aiming the opposite direction a second ago) and they shoot you, they complain; if you go and kill an enemy, people will often complain that you stole a kill that was 'rightfully' theirs (because they had run off to gain an advantage or something
), but they couldn't make the kill for fear of hurting/killing you.
Besides, some classes will be left out. If horse damage isn't counted, the faithful pikeman that dehorses all the cav and then watches as his team rips apart the still-fallen cav player before he can get a hit in, he will not be rewarded for this. However, if you make horse damage count, a good pikeman that catches cav unaware can kill most cav horses in one hit. With the health horses have, this would give him significantly more gold/xp than regular infantry, for less effort.
Also, how would you take armor into account? It's not fair if some loser picks on all the peasants and goes around one-hitting them, then gets more gold/xp from it than someone who kills one or two tin cans after lengthy battles with them. Unless you take armor into account, this quasi-polite system of not killing peasants straight away (most people probably just do it because peasants aren't as big of a threat as other enemies) will turn into a system where a peasant simply cannot live more than a minute through a game.