Quake II when you injure/kill your targets are marred by damage. I can't remember if this is a option of the models or if it's something engine side, but it's not impossible to adapt this to render the model of the walls as having a hole where you just fired a rocket through it. Of course this is a concept rather than a fact, but it might be worth pursuing if UFO:AI is based off a modified Q2 engine and while it doesn't permit blowing big holes out of the terrain itself, it definitely could bring us closer to blowing holes through walls that can be used for tactical advantages.