At Level 20 -> 2d10 +Str bonus. You call this "little damage"
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Yes, I know. I think a monk's fists become vorpal weapons in epic levels too. But, compared to, say a 20th level fighter with equipment according to his level, monks deal less damage. Not to mention you have to actually stay alive long enough to reach 20th level.
But that still wouldn't explain why anyone would want to go unarmed in KotOR, since jedi receive the most advantages of any class when it comes to melee combat, plus, lightsaber proficiency.