Yep, you are correct, I just checked. 2E made critical hits an optional rule in the DMG. Regarding called shots were a standard rule, but clearly states that attempts to blind, cripple or maim will not succeed. So, there is no way that players character should have been decapitated, unless the damage was enough to kill him outright. Further there is no way the other player should have gotten surprise as there is a +1 to initiative on a called shot. It's funny how we would take the parts of the rules we liked and conveniently forget or disregard the one we didn't.