Is there a way to have separate collision objects on an actor which takes different amounts of damage: such as the head.
Yes, they are called “hitboxes” and widely used in FPS games to speed up caculations. You basically create a number of hit boxes (ellipsoids for heads, cylinders for arms etc.) and attach these to specific bones. You can use the “Attach to” node for it. When you trace a line the hit result gives you the hit component as well as the actor. Then you just need to setup a mechanism to tell you where you hit.
Far Cry 2 and Metal Gear Solid 2 even achieved “Heartshots” with those. It was fun to shoot people in the heart for an instakill.