Simply being hit should not affect your ability to defend yourself or damage enemies. If you were handicapped by health, your skill is irrelevant in determining victory. You'd just see wounded people waiting around for their health to regen all the time instead of fighting. It wouldn't be fair if you were much better at the game but died because the game won't let you play properly based on virtual "health" issues. Also I usually do notice slashes on the body where you hit somebody, not just with knives.
A game where this idea 'does' work is Rainbow Six, an old-school shooter where you could either be full hp, wounded or dead. If you were wounded you could just limp around slowly and shoot. In chivalry, this idea is better suited for a mod than for the actual game. Sometimes balance is more important than being realistic. This also explains why daggers can parry mauls. Also I recommend trying black knight mode and making a short video of it. It's funny ****.
