I've run some custom arenas with friendly collsions on. In the right setting with willing people, it adds another layer to the immersion. In the free-for-all mains it will not work well.
In large, organized events with registered participants who are aware of the setting, it might work, but is unmanagable when you consider the mass takeoffs, and the congestion of rearm pads. There is no way to turn it on or off based on if your in the air or on the ground, and when people can land and rearm anytime, it's a juggling act that anyone running the event cannot succeed with.