Good debris is one thing - you basically are just ripping the LOD1 of the ship apart and filling the newly created holes with various debris textures that are placed on a debris version of the main ships map - where you can go and paint in blast holes revealing the structure beneath and the like.
'Chunkifying' a ship so that you can destroy individual bits of it without destroying the whole thing is much much harder and looks far uglier. This is because each chunk needs to be at least one separate object (two if you want to use live debris where the blown up bit falls off the ship). As such, any smoothing of curved surfaces would be broken up at the boundaries where chunks met - which would look absolutely hideous on vasudan ships.
Then you have to accommodate what would happen if a player blew up the geometry below a turret bank - obviously the turret would either vanish or just float there, and what happens if more than one hull chunk is underneath a turret? As you can imagine this also has the potential to introduce massive balance problems for some missions - such as just blowing off the sath's entire head rather than shooting the beam turrets, but you will also screw up stuff like bounding boxes for the entire model which would need fixing - and I'd be willing to bet more than a few collision detection problems would arise at some point.
On top of this you have the MASSIVE efficiency hit that doing this will cause - not only because of how you will need thousands of extra polys forming the 'insides' of each chunk, but the HTL engine won't be able to render the hull in one go due to it being split into subobjects. Now imagine this combined with texture tiling and think of the efficiency hit there.
Incidentally, this concept has been brought up, shot, stabbed, castrated, hung, skewered, poisoned, drowned, run over and otherwise murdered in horrible ways and subsequently buried quite a few times now.
