Whether or not you think MMA is a "real fight simulation", we can easily agree it is an attempt to get as close as possible while still following modern laws, as well as modern medicine (protecting fighters from permanent damage that will prevent future fights). Rules are not arbitrarily made (generally). They are a "real fight situation", with added rules to support the legal and safety issues that arise when you have a fight sport in 2011.
That being said, scars have never been considered unacceptable permanent damage in MMA. Blinding is, thus the eye gouging rule, which has existed since or before UFC 1. Blood left in the eye causes blinding very quickly, so the fight is ended. It is possible that a guy with blood in his eyes could win, but highly unlikely. It's also possible a guy with a snapped arm could use adrenaline and knock the other guy out, but it's unlikely enough that the relative danger/damage is clearly not worthwhile.
Nobody reasonable complains when the fight is stopped after a completed armbar. If you think a guy with blood in his eyes should be allowed to continue, then you also think Sylvia should have been allowed to continue when Mir snapped his arm. But if you think that elbows should be removed entirely, then you should also think that armbars should be removed. I mean, if successful, either one can prematurely end a fight that might have continued on the street.