Yes, I did this a few years ago with my old Smivs'Shipset, the forerunner to The Classic Ships, and also used it in other OXPs of the time.
They showed damaged textures when the hull took damage (low energy) and went derelict (progressively shut down/switched off lights) if an escape pod was launched.
The 'going derelict' feature was carried over into The Classic Ships as it works really well and adds a lot to realism, but the damaged textures were abandoned. Although they worked well and were quite effective, it never really fulfilled its promise due to limitations in the game, mainly the inability to identify where on the hull a ship was being hit. In practice you could shoot the ship in one place but the damage appeared in a different place depending on the texture used. It is not possible to improve on this without NPCs having separate front and rear shields (at least) and the ability to select a damaged texture appropriate to the location of the hits.
Were subentities a thing at this time? From what I read from the wiki, it seems possible to set up subentities that could be destroyed, revealing a damaged texture. It would not be so accurate that you could carve your name on their hulls, but it could be enough to add visual damage to a few interesting spots (like thrusters, or the tip of wings), where the player is most likely to "enjoy" it.
In my very personal opinion, being able to blow off parts of the ship could be better since dogfights are often too fast to let you admire the details of the textures; they are often not visible at all anyway when you set your ambient lighting to a very low value (like what KeeperSky does). OTOH, a missing thruster or wingtip is something one can more easily notice.
I think the DTT Manta works that way: you can blow off the whole "wing" part, which is slightly annoying because it's actually the main part of the ship, so it gets harder to hit the ship once it is gone.