Thinking about this some more, I think the other main factor in thinking of "Fists being made of Fail", that has already been touched on by a few, is what sort of game you are running. Namely, what sort of characters do you have in your group at one level of power and the focus of the game itself. If you are running a fairly low key, mortal game, Fists is going to be a very valid skill to have. By the same token, if you are running said game with a running theme of realism to it, walking around your local city/town strapped like a Spec Ops team has some severe consequences.
And, if you don't believe me, go out to a parking lot of a local strip mall with some bopper swords and start some sparring up. No need for excessive yelling or dramatics. Then time how long it is before at least one patrol car pulls up to see what is going on. Personal experience from my college days can vouch that this will happen. Sometimes inside 10 minutes. Some times with a fairly large response if some citizen reported this sparring as armed gang violence. True story on that one BTW; we were covered by three 9mm's while we explained to the lead officer what we were doing in front of my friends apartment.
Amp this up to carrying around actual, real weapons and imagine how well that will go over. Amp it up again to actually discharging your weapons and now you really have some attention. Guns are loud. Most people getting hacked into by a sharpened length of metal are loud.
BUT, if you game is higher powered, then, yea, mortals with Fists are just going to be less useful. The game I am running has 5 Submerged level wizards that are part of a White Council black ops squad hitting Red Court holdings, kidnapping black-magic cultists and doing other such dirty jobs that a normal Warden force isn't well suited towards. Needless to say, against most of the opposition they run into, duking it out with bare knuckle hand-to-hand combat does not happen much. And for good reason.
At this level of power, if you want a Fist oriented character, you need to add in some supernatural bang to the mix. Like cooking up some chi (or whatever) powers for a mystical kung-fu master. Then throw in some good stunts to boot.