This question isn't so much from a coding perspective, but the hardware requirements...

In my game, I'm planning to use a life/damage system similar to UT or Halo, given that the heavy amount of players (10-20 players, scaled upwards to possibly 5-10 AI units per player) would probably make the Killzone life/damage (which is more realistic, single shot kills, etc.) totally infeasible.

What kind of hardware requirements are we talking to be able to have a dismembered model, and still be able to use him? For instance, I have a gun that shoots a tiny explosive. I hit someone in the arm... Boom, that persons arm is gone. But, I want them to continue on with one arm (providing the damage didn't obviously kill them too).

What kind of hardware requirements am I looking at for something like this?

That question is super vague...
Dismemberment is as easy as just skinning a mesh with several different parts, then only rendering the valid parts (full arm? or just a stump?). Then, duplicating the mangled part as a gib to toss around the level. You are going to double or more the memory requirements over a normally skinned model, but other than that there shouldn't be much more in the way of "requirements".

There's a lot of different ways to implement dismemberment... depending on your constraints you can always design a system to fit in them.

It you look at L4D2, it requires:
Dual Core 2.4 GHz CPU
1GB RAM
DX9 SM3.0 GPU

I also made

">a dismemberment mod for Half-Life, which required:
0.13 GHz CPU
0.023 GB RAM
Any video card supporting 16-bit colour at 640x480

Alright, great. Well, my basic question was whether allowing people to control and still move these dismembered meshes was a big hardware requirement (given the amount of changes done to meshes and so forth or what.

Anyway, thanks a bunch for the help!

I may be bumping an old thread, but you can find some papers on this if you look in the right places. Valve has a nice little presentation on dismemberment in L4D2

http://www.valvesoftware.com/publications/2010/gdc2010_vlachos_l4d2wounds.pdf
(the /publications/ has a few other nice thing but I don't work at Valve so I'm not going to be their unpaid spokesperson)