What you are attempting to do is to approach this with a scientific approach. As you dig deeper into the current "incident energy" hazard estimation, you will find more and more very blatant and obvious discrepancies. What we really have at this point is a completely and utterly flawed model for predicting an injury that however flawed it may be, has worked for over a decade. So essentially the best approach at this point is a leap of faith approach.
A statement from Hugh Hoagland explaining this seeming contradiction (reference below) is the following:
"Clothing ignition was a primary cause of serious
burn injuries and fatalities for electrical workers exposed to an arc fl ash
event. The adoption of FR clothing for electrical workers by many utili-
ties and industrial companies resulted in a signifi cant reduction in arc fl ash
burns and fatalities (Bureau of Labor Statistics, 2012 ). Privette continued
the work for the next 3 years as he investigated and published a critical
study on arc fl ash and skin response (previous studies had been done on
IR lamps and fl ame sources (see Stoll and Chianta, 1969 ). Privette’s unpub-
lished study showed much promise; however, a lack of funding caused the
standards committees to default to the Stoll Curve (Stoll and Chianta, 1969 )
which has been the line of demarcation for clothing and equipment arc rat-
ings since it characterizes the ‘onset of second degree burn’. It is not true, as
some of the standards indicate, that the worker has a probability of a second
degree burn at the arc rating. The fact is that many workers do not receive
any burns. The number/curve is a theoretical model."
As to the arms vs. chest/face, it's quite simple. What most people fail to recognize is that the whole thing is based on survival. You can survive without you arms and legs but a burn in the chest/face area significantly reduces the chances for survival. 70E is not based on "no injury" or "just curable" or anything like that except in the critical areas of the body...it's only meant as a survival standard. It's a survival standard. This should be pretty obvious but the incident energy increases as you get closer to the arc. It is simply physically impossible to provide PPE that can survive the arc and still retain any use of the hands and arms if we tried to do this. Imagine what ATPV 300 would look like on your hands. Obviously the whole standard is a joke from this point of view since when we say "8 cal/cm2", we mean uniform 8 cal/cm2 for all points on the body. The legs and back should be a little less in most cases while the hands and arms should be much higher but going back to Hoagland's statements...this is a theoretical concept, not a practical one. Any attempt at understanding it from an engineeering perspective will fail.
Delving somewhat deeper your argument about cotton shirts and the like is VERY accurate. There have been some papers published discussing this exact thing. Simply put, either the material itself or the chemical treatment applied to the fabrics to make them "FR" prevents them from sustaining a flame. The insulative value (ATPV) is entirely due to their ability to thermally insulate..usually by trapping air. An ordinary untreated cotton fabric does indeed work up to around 10 cal/cm2 or more as long as it doesn't ignite. Various "meltable" fabrics such as nylon and polypropylene do an even better job of insulating, as long a they don't melt or ignite.
Here are some references on the subject, although the first one is probably the best in terms of giving you the information you are looking for. All three look at the ignition point (ATPV) of cotton and similar materials but the first one looks at incident energy of a worker protected by untreated cotton as well. I know none of these are free but you can find them in a local college library.
http://ieeexplore.ieee.org/document/6825868/http://ieeexplore.ieee.org/document/6268991/http://ieeexplore.ieee.org/document/1413452/The upshot of the latter is that yes even if the incident energy is just under 1.2 cal/cm2, there is a chance that a cotton shirt could ignite and cause a pretty severe burn. The alternative is to wear FR PPE for effectively ALL electrical work, no matter what the incident energy rating is. That is almost exactly what OSHA has put out as a regulatory requirement for utility workers.
In a chapter entitled "Flame resistance textiles for electric arc flash hazards" penned by Hugh Hoagland, he had this rather interesting statement: "Arc fl ash standards, in contrast, allow only a 50% probability
of onset of second degree burn in the area that the arc hits. In practice, this
means <25% body burn in a real life incident because of the focused nature
of arc fl ashes in the fi eld. Even the arc fl ash tests ASTM F1959, IEC 61482-
1-1 and IEC 61482-1-2 do not cover more than the area of the front of a
shirt with the arc fl ash energy. When clothing does not ignite or melt, real
life incidents rarely result in more than 25% of the body being exposed in
an arc fl ash event."
I can't find the reference for you right now but another interesting point is that FR PPE prevents propagation of a flame and that the area of exposure is "focussed" on an area less than 25% of the body. A lot of burn data shows that if burns are confined to less than 25% of the body's total surface area, survivability is extremely good. The upshot is that even if the PPE is completely under-rated, wearing non-combustible PPE (in other words, FR rated PPE) virtually guarantees survival. In other words the case you are describing is covered by wearing FR PPE. Even more importantly to me personally even if I'm dealing with say a 20 cal/cm2 incident energy condition and I'm wearing only 10 ATPV PPE, I have a very high chance of survival.
I've been at odds for years with Hugh Hoagland's idea that essentially all electrical workers should be in FR PPE for almost every task. My arguments are that first off it seems kind of pointless to be wearing it for "marginal cases" like <1.2 cal/cm2 and in years past, the stuff was downright uncomfortable and only something I would wish on a welder. But I've softened a lot on my opinion. Based on some of Hugh's claims it seems more likely that survival is all but guaranteed with any level of FR PPE, no matter what the ATPV and incident energy. That's extremely comforting to know. Then if we want to argue about how much PPE should be worn above this very basic baseline of protection and refine it a little as long as we don't do stupid things and go crazy with the requirements, I'm all for that, too.
What changed? A couple things. First and foremost, I worked in a foundry for 5 years. I was in FR PPE during the entire work day, every day. Second I observed the arguments, frustrations, and difficulties that a large national lineman contractor had with switching to requiring FR PPE. There was resistance at first but it seems to have finally become accepted. The final issue is that many areas and operations require hi visibility PPE in addition or in lieu of FR PPE. In years past the choices were either/or but not both. More recently you could start to get hi vis vests that were Glengard or something similar that is both hi vis and FR PPE. It is mostly modacrylic for color fastness and it is VERY expensive, especially because Glengard is patented. The alternative is FR rain suits that are not only not very comfortable (they don't breathe at all) but very expensive. However now Glengard or something similar can be purchased as rolls of stripes and a lot of vendors now offer an ordinary FR shirt with FR stripes sewn onto the shirt. That has basically eliminated the problem although if I could just find knit long sleeve FR hi vis T-shirts for around $30 I'd be buying them and wearing them instead, especially here in the South in the summer when full long sleeve 12 oz twill shirts are very hot and sticky to wear.
Bringing it home, this is not just an engineer spouting some kind of opinion here. If you see me on a service call that involves energized equipment today, I have on a tan shirt ATPV 10 and either brown duck pants or blue twill pants on, both with ATPV 12. A lot of the time since many of my customers can't afford full time electricians never mind engineers, they have no idea what the incident energy of their equipment is and neither do I. So I might be over or under-rated but there's not much I can do about it except dig out the 40 cal suit when I know that I'm dealing with something where the incident energy is even higher....I use the much maligned tables.
Switching to FR PPE is easy in a steel mill or foundry, or a refinery, or pipelines, or some coal mines because that has been the rule for years, and more recently for utilities. It is a much bigger leap of faith for everyone else. So I can understand and respect the idea that FR PPE is not and should not be mandatory for all workers in all cases. We're talking about an extremely unlikely injury in the first place. For instance I can't possibly justify making every residential electrician wear FR PPE. Nor could I make the case for the vast majority of relaying or controls technicians that rarely work above 120 V equipment. But for the rest of us, it should be given serious consideration.