Oh, I like the idea of that. However I don't think crushing soldiers' HP so much changes much - even the basic nonheroic soldiers, confronted with the fact their guns are puny against heroic enemies, will just pack rocket launchers, mortars, landmines, flamethrowers etc to level the playing field
On the positive side, you can keep armor of unarmored humans at 0 and still a noticeable % of shots deals 0 damage (1 in 15 for a standard 7 power firearm, sounds about right).
EDIT: I actually managed to "finish" campaign, that is, play it for 6 or 7 months until appearance of more advanced enemies and lack of research made it too hard to proceed. The last thing I did was to capture an Outcast with serious losses, but he did not grant me anything of visible value, so I decided to try again in next version
I used the lasguns to win first mission, then I sold them and proceeded normally. I randomly choose American campaign and went on a Huey with hard rock blaring.
Even at the moment, the pacing seems quite fun in the first months and I seen nothing I disliked.