Weelll, for what it's worth, both the inside and the outside use the same basic system. They both use decals - sort of like the bullet holes you see in FPS games...more specifically like the bullet holes in FEAR. These hols are parralax-mapped to give a feeling of depth to the damage. That, however, is as far as it goes. We're not planning on doing any model modification to the ships as they get damaged - but you will see projectile impacts on the target.
Anyhow - on to the next thing! Whoo!