After discussing it with Nick, the ruling on hits to different body parts stands thusly: If you are struck in the head or the groin, you don't have to take the hit. You can if you want, but it's not required. Anything else is a valid hit location, including hands and feet.
We're adopting these rules because they're simple and easy to follow, and serve to deter strikes to the two most sensitive areas of the body. At the same time, it lets people be "hardcore" and take it anyway if they want to. We didn't feel hands or feet deserved any special deterrence for the simple fact that, if it hurts when you get hit there, it's most likely because the person was striking too hard to begin with.
Note that these rules apply equally to packets and arrows as they do to weapons. Although it's incredibly difficult to aim them with enough accuracy to avoid head and groin shots, we felt simpler was better and not having to take the hit would be a nice consolation prize for the person who just got nailed. After all, whatever the packet or arrow were calling is probably less debilitating than the real life physical damage anyway. ;)