Regarding military:
The problem with marksdwarves is that they require a constant stream of wood or bone bolts that they use for training purposes. Even with massive goblin sieges (~75 dead goblins each siege, modded to size 7 (Normal is 6, iirc)) and ~120 female animals constantly breeding I wasn't able to keep up with the training demands of my eight marksdwarves (I had five bonecarvers running around the clock at one point). After the production peak, I managed to have 3-4k odd bone bolts stockpiled, possibly more, but when I checked a season later I was already down around 1.5k despite a steady stream still being made.
The problem with dwarves using melee weapons, however, is that they require an armor industry to be up and running if you have any intention of your dwarves to remain free of nerve wounds. Leather is easy to get up and running quickly (Caravans can bring obscene amounts of leather) and works well for early sparring sessions, but don't expect dwarves to do all that well in actual combat with only leather armor.
You also have the additional problem of weapons amplifying the damage potential to your sparring military. It is for this reason that many people train weaponless for varying periods of time before giving their military actual weapons to train with (I wait for my first wave of recruits, eight total, to all hit champion level before giving them weapons). Weapons choice also matters significantly in terms of what wounds you get while sparring. I consider blunt weapons to be the safest bet as a possible increase in nerve damage is better than a severed limb or mangled internal organs, but, again, this is a personal choice of mine. Lack of severed limbs also makes siege cleanup easier. That, and I love watching the goblins go flying across my currently dry moat and slamming into the wall.
Ultimately, however, it can all boil down to training dwarves with melee weapons and placing all/most of the dwarves that have nerve damage into marksdwarf squads. Or if a dwarf sparred enough to reach reasonable skill levels, putting him on permanent guard at your front gate.
As far as effectiveness goes, both are very effective. Wound potential is actually rather small once you're in exceptional steel plate, the problem is finishing the fight before your dwarf tires to the point where he is no longer able to defend himself. I remember watching one of my low level legendaries (Only reached the normal level with hammers) holding off six or seven goblins without taking much damage, but, over time, he became tired, over-exerted, and eventually he just flat out passed out, and only then did he start accumulating serious injuries and eventually die.