I think one way to do this would be to tie damage to the mounted components that are listed in F4. You could see that your Gat guns are damaged and only doing half-damage or whatever, or your booster just got knocked out. If you are in a gs/bomber/cap, you could see the turrets taking damage or being disabled. And some key combination could let you decide which element in the F4 screen gets top priority for repairs if you are being nanned. This leaves out sensors, engines, etc., however, since they're not separate components in F4. Either these can just be left out, on the logic that these components' main elements are built into the very heart of the ship, so they don't go until it goes, or a special section could be added to F4 for them... the chance of the radar getting knocked out or giving erroneous information is too fun to pass up.
One thing that bugs me though, is that combat in Allegiance is very fast-paced. A heavy mg3 interceptor can shred through many small ships in a few moments. So simulating specific damage seems to complicate things without adding too much. Of course sometimes you also have long, protracted dogfights, but since these are mostly a case of two ships circling around each other while trying to keep their guns aiming at each other, again damage seems a bit unnecessary. Most damage would always be dealt to the front of the ships anyway, and really it would just make things harder without really adding too much. The challenge in a dogfight is to have good aim, and to know how to dodge, and when to use boost/missiles/mines/etc. if you have them. Considering localized damage really doesn't add too much.
Also, combat nans are rare... Although perhaps they would become *less* rare if this was implemented?
But honestly I think localized damage should be reserved for larger ships -- mid-sized and up. A gunship or bomber taking damage to specific components adds to the game; a capital ship taking localized damage adds *a lot* to the game. A fighter taking damage to some component a few seconds before it's about to explode anyway? I am not so sure...
