01kipper: MSPE has no added damage due to weapon ranks (except Pugilism, but in that case it replaces the base weapon damage).
I've been thinking that they should have given Pugilism a bigger bonus per rank than other weapon skills, seeing as how fistfighting is so weak compared to other weapons. 1d6 extra per rank (in addition to the +3 damage per rank that all melee weapons get) would put high rank Pugilism at a level between the Chainsaw and Proton Axe, which feels about right. (Proton Axes would stronger at realistically attainable Brawling/Pugilism levels, but there's only 2 of them.)
Also, making Pugilism boost unarmed combat damage more would be aligned with not only MSPE, but also with other games I've played like Final Fantasy 2 and Dragon Wars (though the latter seems to cap it at some point).
As for why they added this, I think the developers wanted to make melee combat worthwhile, especially since:
* You can only advance one square per turn, and each of those turns the enemies will get to fire on you.
* Even when you're in melee range, ranged attacks always come before melee attacks, and acting last puts you at an obvious disadvantage (if KOed by a shot, you don't get to use your melee attack that round). (Of course, with Speed only mattering in melee , and Agility affecting melee evasion, it turns out that the Speed stat is rather pointless; just raise Agility instead.)
01kipper: Did you manage to narrow down any further what's going on with unloaded guns (you mentioned earlier that they seem to do roughly half damage compared to what you'd otherwise expect)
I'm suspecting that each gun has its own unloaded damage rating that's different from the damage done when you shoot; the Red Ryder doing such poor melee damage (as opposed to the 200d6 damage it does at range) is strong evidence for this. Perhaps I may need to test each gun individually, or figure out how to extract the weapon data and see if it has such a field for this.