Regarding the "no damage unless hit in head" bit :
I've tried this myself as well, to no avail. It seems ArmA is even twitchier than OFP with the whole "dead - not dead" bit. In OFP if you got killed and then revived, it gave you the death dialog and you were...well...dead (even if your avatar still ran around). Whereas AI could continue on killing stuff.
Alas, what I've tried in the editor (using among others the dammaged eventhandler, and also something as simple as "?!alive unit1 then unit1 setdamage 0") : once a unit in ArmA is dead, it's dead, and it ain't coming back.
If anyone else has another experience of this, please do tell (testing done in 1.07+)
This could potentially be worked around somehow (create a new unit and name it the old unit's name, transfer all the equipment etc.), but that'd be a bit of a bitch really. Sigh. Maybe a future patch?
Wolfrug out.