After a lot of thought, spit, and polish, I think I have finally tweaked the combat system to be fluid, easy to use, and  a lot of fun. The hits and wounds are integrated now, so you don't have to choose to do one or the other, you get both.

Also, I have included a health status system, so as characters become more wounded, the types and severity of the available wounds increases, resulting in climactic battles.

Here's an example from last night. A simple one shot battle.

Hercules has landed on Island X, a mysterious floating island cloaked by mist and home to none other than Dr. Diabolical. Hercules is tasked with finding Diabolical and bringing him to justice—but first he must wade through the dense jungle of Island X to find Diabolical’s fortress.

The game pits Hercules (150 point hero) versus one of Diabolical’s henchmen, Glamazon (100 point villain) and 5 of her war ape henchmen (10 point minions). Furthermore, Glamazon gains Ambush on round 1.

Setup: Hercules starts on one edge of the game board and must cross it to arrive at the fortress. Glamazon and the war apes start off the game board, waiting to ambush Hercules.

Round 1: Prior to initiative, my friend places Glamazon and the 5 war apes in base-to-base contact with Hercules—The Ambush!
We both roll initiative, resulting in Hercules winning. Since all the opponents are in base-to-base contact, Herc can automatically see them all and does not have to search for them (Ambushing characters enter the game hidden).
Realizing that with so many opponents surrounding Herc that his defensive powers are reduced, I decide to take down as many war apes as possible—I could attempt to breakout of the circle, but my friend would have got a number of free attacks that could completely weaken Herc.
For his first attack Herc uses his Super Strength +6 modified by +2 Champion and +2 Mutation: Super Strength for a total modifier of +10. The war apes have a lowly defense of Super Strength +3, +1 Digital, and +3 base defense for a total defensive TN of 7.
Herc rolls 2D6 +10 for a 15 heavily wounding the ape. The second attack scores a 18, and the war ape is eliminated.
My friend moves in with his war apes, but realizes that Herc has the Bullet Proof special ability, which makes him invulnerable to the war apes +3 attacks; however, the apes still serve to surround Hercules and weaken his defensive capabilities. So, he attacks with Glamazon.
Glamazon attacks with her Staff +6, and a +2 Talisman and +1 Nemisis special ability for a total attack modifier of +9. Hercules defends with his Super Strength as well, gaining the same +10 modifier plus and additional +6 defensive base. Glamazon rolls 2D6 and must score 16 or higher to score a hit versus herc.
She rolls a 17 and 22, scoring 2 hits of Damage.

Round 2: Herc wins initiative again. This time I decide to use a hero action—using both of my Actions—to attack Glamazon. I roll 3D6 +10 and score double 6s for a total roll of 50, a 3+3 attack (3 Hits and 3 Wounds). I first do 3 Hits of Damage, which now means Glamazon is wounded. I then use 2 wounds to slam her backwards 12” into the forest. I also choose to follow her moving 8” along the same path.
The apes use their actions to close back on Herc, surrounding him once again. Glamazon charges and scores a 1 Hit attack and a 1 Hit + 1 Wound attack, which she uses to Grab herc.

Round 3: Glamazon wins initiative and attacks Herc twice for 2 1-Hit/Damage attacks. Herc’s Damage Level is now 6—He’s wounded but approaching a heavily wounded state as well.
I realize I need to take out more apes, but only manage to eliminate 1 more with two attacks.

Round 4: Glamazon wins initiative again and goes for a kill. My friend uses a heroic action—both actions—to roll 3D6 +9, but doesn’t score a critical. In fact all he scores 1 Hit of damage.
I was lucky. Herc attacks and kills 1 ape with a single attack—finally.  But misses the second ape—Glamazon still has the surround advantage!

Round 5: Herc wins initative and takes out the remaining two apes—no more surround advantage for Glamazon. However, Herc’s Damage Level is 7 and Glamazon’s is only 3.
Glamazon goes for another heroic action roll and blows it again, only scoring 1 Hit of Damage. However, that 1 point of damage is enough to push Herc over the edge from Wounded to Heavily Wounded. He rolls a Fatality Roll and makes it.

Round 6: With Herc heavily wounded, it becomes easy for Glamazon to win initiative. Glamason makes two separate attacks scoring only 1 Hit of damage. Herc goes for a heroic action attack, and scores another 3 Hits + 3 Wounds. Glamazon’s Damage Level would increase to 6, but Glamazon uses her Dodge special ability and avoids the attack.

Round 7: Glamazon wins initiative and makes another heroic action hoping to finish off herc, but rolls low again! She only does 1 hit of damage, and Herc makes his Fatality Roll.
Herc makes a heroic action attack as well and scores huge again—and this time Glamazon doesn’t have anymore Dodge special abilities. Herc scores 3+3, which increases Glamazon to a Damage Level 6 and to a Heavily Wounded state. He uses the wounds to slam Glamazon 24” away—however after only 11”, Glamazon hits the edge of the game board and chooses to take 1 additional hit of Damage rather than be slammed off the game board and eliminated.
Herc now has a Damage Level of 10 and Glamazon 7—both characters are heavily wounded.

Round 8: Glamazon wins initiative—even though both characters are heavily wounded now. She makes another heroic action attack and finally scores a high attack, 2 Hits + 2 Wounds. She decides to do 2 Hits of Damage and use the 2 Wounds to Cripple Herc’s Super Strength, reducing it from a +6 to +3.
Hoping to severly damage Glamazon, I go for a heroic action roll, but come up short—1 Hit of damage only. Glamazon easily makes her Fatality Roll.

Round 9: Herc wins initiative and makes a heroic action roll—scoring a 2+2 attack--crippling his Super Strength keeps him from scoring a 3+3. Hoping to end the game, I decide to go for a Deathblow—which takes all my hits and wounds. Glamazon must meet or beat 2X her current Damage Level of 8, or a TN 16 rolling 2D6 +5 (Life) +1 (Nemsis). Glamazon rolls an 8 and fails her Fatality Roll. She is eliminated from play.

Herc survives, but takes a beating in the process.

The new system is an improvement over the older system, because players aren’t choosing to either score hits or wounds—they get both. It is still opened ended, and with the addition of wounded/heavily wounded, the crap starts to hit the fan in the 2nd or 3rd round, and then in the 5th or 6th round the game-ending wounds are available.

This game took about 22 minutes.