Here's a new oil tanker I'm making for an upcoming cargo ship pack. Its metal deforms when it breaks up, simulating the effects of blast and intense heat. This still needs some work, since the two halves are almost totally transparent at certain angles. Unfortunately, I have no idea how to make torpedo holes that would be accurate based on where the ship was struck.
Look at the new ships thread for a few more examples of this modding.
I really want the next major subsim to feature enhanced damage modeling out of the box. 'Nascar Racing 2' was produced some years ago and had excellent simulation of metal damage, so it's definitely possible for a modern computer game.