In the most simple implementation (and one that is absolutely good enough, IMO), no new graphics need to be added. Just use the existing damage decals that already get applied.
The client should be able to handle any additional load - if any - that involves having to paint on the decals to player ships. If your client can't handle that, I would guess that your client probably can't handle any ground missions (which are much more graphic intensive) or any battles with ships that use a lot of beam weapons.
At the most simple form, just do this (pseudo-code) :
if ((damage > 50 && damage < 75) || injuryCount > 2) // or whatever
and go up from there.
Leave all repairs and heals exactly the same (for now). I think just adding in this little bit of "persistent" damage would improve the immersion a lot would open the door for additional functionality with damage.
you also need to consider the load when there are a lot of people in system at the same time.
if you had 50 people in a zone (its max) and all of them had battledamage then the server would have to transmit 50x number of battledamage decals to every other ship out there, that would be quite a large payload on the server to be dealing with for basically eye candy.
it would have been better if they had made ships modular in terms of damage but even then your increasing server load for effectilvy eye candy.
the galaxy retrofit shows that your ship model can seamlessly and on the fly be swapped for just the star drive section and a sauser pet. seems like as you take damage, parts of your ships model could be swapped out for more damaged looking sections. and i mean with visible holes and chunks blown out. the current damage skin looks pretty atrocious, it looks like you got hit with a doomsday machine beam, not a torpedo or two.