This has been a great thread since I'm running into this situation often. I currently don't allow called-shots in my game, but there is definately the demand from my PCs. I like the concept of the 'called-shot' but the main reason I have resisted is I believe in applying the Golden Rule to my games (the whole do unto others....); point being if PCs can decaptitate a villan, than a villan should be able to decapitate a PC.
I'm liking the idea of an increase in the body parts AC due to size, and then max damage plus an appropriate effect. I'll probably sort through the 'Critical Hit Deck' to get some ideas for the effect. I'm most likely going to avoid severing limbs or decapitations because these things can really get out-of-control in my opinion.