I think the solution to the problem is rather simple:
Don't get hit by the enemy. If you're getting hit, you're doing it wrong.
My favorite is when I torpedo an enemy ship, and the propeller shafts are gone, but the props are still spinning away happily. (Of course, again, if you're torpedoing ships, and their propellers are still working, you're doing it wrong.
)
The massive holes in submarines and targets are a bit overdone. It's nice to see a hole appear, but it should really be related to the amount of damage done. It's annoying to see a line of holes down the side of a ship with the bow blown open, and the ship doesn't even slow down.