Working decals with normal maps (as has been mentioned) would be the best way to get a ship to display progressive battle damage.
Just as geomodding kills coders, generic destroyable 'damage subobjects' kills modders.

Especially if you want live debris. Seriously, the amount of work it adds to the already fairly lengthy time to build a good ship and get it in game is just not worth it. Most mods (including the FSU) have their shipbuilding capabilities already stretched to the limit, so I'd say it'd be a much more worthwhile use of time moving on to the next ship rather than devoting time towards making a few damage chunk submodels.
It's not too hard to have destroyable details on the surface of the ship - those can be cool with (sometimes) relatively little extra effort, but as soon as you want to go taking chunks out of the hull, you have the problem of the edges of the hole, because what happens is that those edges need to look good when the hole is covered AND when the hole is showing. That's the really difficult bit. And yeah as Mjn has already said, smoothing over a splitline through curved surfaces is pretty much impossible.
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Now decals with normal maps could be much more finely crafted so that you can see damaged internals almost as though they were geometry, and you'd also get the blackening effect around the edges of the hole that is so important to the overall impression. With shaders you could probably even get some to give a distortion effect to the hull beneath implying warping/denting etc. Given a variety of these and maybe better and/or more varied particle spew effects on impact, you could get a much better looking overall progressive damage system for all ships for a tiny fraction of the effort needed to get even a handful of large ships using damage subobjects.