At the moment, the DF combat system is very basic. The only thing that separates it from most other combat systems is the detail of injury, and there are other games (IE Unreal World) who do it better. There are a few things that can be done to make the combat of this game truly epic and Legendary, as befitting of this game.
1. A greater difference between the Novice and Legendary Levels of Skill.
At the moment, the only thing that separates novice from legendary is hit chance, block chance, and damage. Higher levels of skill should come with perks.
Examples:
A novice swordsman can hit a cat without cutting his own arm off. A swordsman can fight a trained war dog and come out the winner nine times out of ten. A professional swordsman can block twenty-five percent of hand to hand attacks with his weapon. A Master Swordsman can hit projectiles out of the air. A Grandmaster Swordsman can break a lessser skilled opponent's weapon in two, and a Legendary Swordsman can deflect arrows back at their owners, or cut flying Balista Bolts in two.
2. A greater effort required to get to the higher levels of skill.
At the moment, a dwarf (or human, or Kobold) can get to legendary levels of skill within a year by practicing against unskilled opponents. While this may be enough for up to professional levels of skill, to become elite, you should have to train with a wandering Hero, defeat fearsome beasts in single combat, or be taught by someone in the fortress who has a higher level of skill.
3. Discontinued use of the Wrestling Skill as a catch all skill for Wrestling, Punches, Kicks, and attacks with objects that are not nessecarily weapons.
As said above, the Wrestling skill is a very broad skill, and governs many different types of attacks. The other problem with this skill is that it doesn't work very well in combat, often leaving you to do useless things such as grabbing your opponent's nose, and twisting it, or even just letting go. The wrestling skill should be spilt into several skills, maybe Wrestling, Unarmed Attacks, and Improvised Weaponry.
4. Botches.
Right now, you will always succeed at an attack, or making something. You just might miss, or it might take some time to create the object. There should be a small chance of a botch, with severity depending on your skill.
Examples:
A minor fighting botch would be swinging too hard and throwing youself off balance.
A Significant fighting Botch would be dropping your weapon.
A major fighting Botch would be hitting yourself with your weapon.
A legendary fighting Botch would be killing yourself with your own weapon.
You should also gain some experience, on par with a successful attack, from botches. You learn as much from your failures as you do from your successes.