The sort of grappling technique that is banned is the kind where you are grabbing your opponent's body with your hands or limbs. MAnipulating your opponent's body with yoru weapon is permitted, within limits. You may press your polearm against their forearm, for instance, preventing them from swinging their sword. Ther is a technique that invlves sweepiong a polearm under an armpit to move your opponent out of the way while you step around him to hit him on the head. Sticking your greatsword between his legs so he stumbles and falls it right out, though.
Many times fights come corps-a-corps. This can be seena lot in greatsword fights. It is frequently the ands pushing against each other as the opponents attempt to push or lever each other in such a position that would leave them open for a blow.
A very valid and accepted technique of fighting against a polearm when using a shield is to play "sticky hands," keeping your shield into contact with your opponent's weapon. This frequently involves direct contact with your shield against your opponent's hands. A was of deal with that, if you have the polearm, is to shift the pressure from your hands to your elbow or shoulder so you have a different point of leverage and different options of technique.
Range is very, very important in SCA combat. books could be written in the options, techniques, and effectiveness of being in different ranges. Just the variety of weapons forms that face each other, from dagger to 9-ft. spear, should give you an idea of how important range is. Sometimes you can hit a person better from farther out, while hte other person is better at hitting from closer in, and sometimes you are very good at fighting corps-a-corps. As I said, books can be written about the range game in the SCA.
Any fighting competition of any style that is legally allowed in most of the Civilized World has limitations on techniques. Even in the earliest days of the UFC eye-gouging was not allowed. Boxing has illegal target areas. Judo tournaments don't allow striking at all. But I made this point back around page 10 or 20 or so.
It does say in corpora (the defining documents of the SCA) that the SCA is not attempting to recreate an actual medieval battle. The implication is that it is trying to create something more like a tournament. There is precedent for medieval tournaments to not allow grappling (again, I gave the historical reference somewhere around page 20, I think). The SCA is trying to create an idealized medieval society which, by extension, has an elite warrior class with a "knightly" code of behavior. This means that we don't want to hurt our friends. It also means that we wish to showcase our skill with weapons, not our ability to hurt each other. While many people's mileage may vary on this point, and the rules have undergone many changes and always are changing as new technologies in weapons and armor are developed, new techniques are discovered, and people get injured, these rules are for a sport of weapons combat, as much as boxing is about punching and BJJ is about takedowns and submission.
The armor that fighters are assumed to be wearing is an iron helmet and chain mail shirt, regardless of the armor the fighter is actually wearing. Can a sword disable someone's arm through chain mail? Yes. Can a sword cut through an iron helmet to kill someone? Maybe. Can a sword daze someone wearing an iron helmet such that they would be unable to defend themselves for enough time for someone else to kill them? Maybe. Here's an iron helmet. Put it on and let me try. And most certainly some of the other weapons we use (polarms, greatswords, maces, spears) would be able cut/smash/pierce chain mail and iron just fine, thank you.
I again would apply the SCA's injury rules to the same category as the legal target area rules. Are boxing, judo, muay thai, etc. less of martial arts because the sports in which they are practiced have rules that are "unrealistic" for "actual" combat, and the fighters who do well in those sports are the ones who have learned best how to use those rules? If so, there you are, HAND.
I'm not sure I follow you when you say that a martial system should never be "never be first to hit because this removes the need to cover lines and protect yourself during and even after the strike." Do you mean the first to try to hit? And how does this apply to the rule quoted?
First-hit-kill rules do not limit one's need to train for defense, if anything, I would think it trains for greater defense. If you are dead after the first heat, I would try to avoid that first hit as much as possible, and train to get in the first hit without getting hit back.
In any event, the rule you quoted basically says that if you could not prevent the other person from hitting you while you were hitting them, you are dead too. Maybe it's an attitude/philosophy thing, but I see this as encouraging defense.