I've been going through some ideas for what to do with melee/hth, and this is what I'm currently planning. The following is a cross post from the Codex, so that explains some quirks:
The melee damage stat would be ST/3 (tracks decimals), but it'd work differently based on the weapon type. For blunt weapons/unarmed it's a multiplier, for the rest the same flat bonus it always was. So, at ST 12 a sledge or punch gets its damage multiplied by 4, and a knife gets 4 damage added to it. This of course necessitates dropping the damages on most blunt weapons significantly. E.g. super sledges'll probably end up around 5-11 or something (so at ST 12 that'd be 20-44, at ST 1 1-2, instead of the original ranges of 25-43 and 19-37 respectively). Regular punches seem okay enough, though might need to raise them (at ST 12 that'd be 4-12, at ST 1 0-1, instead of the original ranges of 8-10 and 1-3 respectively).
So the net effect'd hopefully be that the difference between a total weakling wielding a sledge and Thor'll no longer be negligible in terms of damage, and that different melee builds might actually make sense now (and the different builds themselves would make sense: high AG for knives, high ST for sledges, instead of high AG for everything).
As to the whole backsliding thing: I'm considering having it only occur when it's "functional", in the sense that it causes either a knockdown (loss of a couple of AP for enemy) or knockout (loss of turn or turns). The regular backslides were, as Clockwork Knight said, almost purely a disadvantage. There should also be a way to avoid backslides altogether: for unarmed blunt attacks that's kicks, for melee "thrusts". All in all, this'd be the difference between blunt and non-blunt melee/hth:
blunt:
-melee damage is multiplier
-causes high exhaustion
-high chance of knockdowns and knockouts
-low chance of damage multipliers (only when causing lots of internal damage)
-low chance of armor penetration (medium with "thrusts").
non-blunt:
-melee damage is flat bonus
-causes low exhaustion
-low chance of knockdowns and knockouts
-high chance of damage multipliers (piercing arteries and squishy organs)
-low chance of armor penetration (medium with thrusts).
Sound good?