Doesn't damage like that cause permanent changes? I mean, you hear about seemingly minor injuries ruining the prospective careers of athletes all the time.
Modern sports medicine is very, very good. I completely destroyed my ACL (the tendon that connects the upper and lower leg in the knee), and by "completely destroyed", I mean my body absorbed all the remaining tissue so that there was no part of the tendon left, and had a graft of my hamstring put in, and it now functions perfectly fine.
Bones, in fact, are living organs, in spite of the common perception, and when you exercise, the bone will actually get thicker, and remold itself so the muscle will have better leverage so that the strenuous activity you are doing becomes easier. Plus, they of course knit themselves back together stronger in the place where they are broken.
Don't underestimate the regenerative capacity of the human body, especially with the benefit of real medicine.
That said, yes, slitting the nerve is potentially crippling, but the thing is, nerve severing is
very rare in real life, wheras it's extremly common in this game. In order to sever a nerve in the leg with a knife, for example, you have to actually hit the nerve, which is on the inner thigh right next to the bone. Oh, right, and in order to cut it, you pretty much have to go through the femoral artery, which is basically a death sentance unless you get a tourniquet on immediately, anyway.
The OP is right, nerve damage should be much more rare than it is in the game right now.