I have shot a real bow. Recurve. 40lb or 30lb pull, I believe. I have shot a 50lb pull crossbow, and a 80lb pull crossbow. (Had to stand on the thing to cock it. Not a fast reload time, heh) ALL missile weapons (guns too!) have their peak velocity the moment they leave the weapon. (Guns, technically, reach their peak velocity inside the barrel.) The ONLY thing you have left going for an arrow doing more damage at short range rather than point blank, is that the arrow takes a little time to start spinning at max speed, drilling through instead of just thunking straight it. Which isn't that much, and a very short period of time as well. (The rotation is actually to improve accuracy of the projectile. I BELIEVE a rotating arrow slows down less than a non-rotating one.) It is very possible to penetrate a fleshy bag of meat (aka, a person) and for the arrow to continue on through, especially using broadheads or the like. (An actual sharp tip, not like a practice tip. Which, come to think of it, I believe most hunting arrowheads are designed to expand once they enter the target... Hmm.) Whoever the archer was here (too lazy to scroll down and look) was right about pointblank being most damaging. Also, the guy that mentioned velocity being equal at start and finish of the arrow is also right, provided the same height. (And the initial velocity being less/equal to terminal velocity.)
The only mistake is the 'bows are more damaging than crossbows, generally'. Crossbows GENERALLY have larger lb pull ratings than bows, because the archer doesnt have to continually pull that much, just hit it once. It's the difference between lifting a 60lb object and carrying one. (That and you can use your entire body, legs+arms, to cock a crossbow, you cant do that to draw a bow.) (Oh, Compound bows follow a rather different principle entirely, but as they aren't in the game... I won't bother.) Crossbows fire their bolts at higher speeds than bows. Generally. A light crossbow compared to a heavy bow is a different story.
The reasons you'd use a crossbow instead of a bow are: Fast fire, once it's loaded. Impressive short range/pointblank penetration, comparatively. Easier to conceal. (Not a factor, here... ... Hmm, what if it was...)
The reasons you'd use a bow instead of a crossbow are: Crossbows take a relatively long time to load, they're one-shot weapons. (Like a black powder rifle to a bolt-action rifle. Oh, and ignoring advanced sorts of crossbows, like pump action (they did exist) and repeating (not sure if THEY existed, but I've heard them mentioned alot.)) Bows are more accurate and more effective over long ranges. (Crossbow bolts are shorter, because of the fact that it would just be unwieldy if you hand a bolt as long as an arrow. This means less accuracy and range.) Bows are generally cheaper weapons than a crossbow. (It has no cocking or firing mechanism other than pulling the string.)
In my opinion, this game does quite well with all ranged weapons. Bows are faster firing than crossbows, thrown weapons are faster than bows. Pointblank is best for crossbows, then thrown weapons and bows are about even, and at range, the bow is king. Bows are hard to 'hold' the longer you do, and this doesnt affect crossbows or thrown weapons. Headshots are almost always lethal. Requirements of Power Draw for better bows. I see only two possible 'flaws'. You have no prayer of hitting anything at extreme range (I.e. fire at 45 degree angle.) Shorter bows don't seem to really fire much faster. (And more Power Draw/Strength SHOULD increase your draw speed. More Agility might increase your accuracy... Should be Dexterity, but there is no such stat here.
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Anyway, that's my thoughts. All projectiles do most damage pointblank. Axes and javelins hurt because of the weight of the projectile, bows and crossbows hurt because of the speed of the projectile.