All Bets Are Off

[eamon]

Considering Most fighter do not in fact have a free hand to punch people in the face with (95% are using a shield), it's the whole flavor text that doesn't make sense.

I imagine my fighter using the pommel of his sword instead.

That's exactly how I think of it as well ;-).

In other words, it represents a novel (down-and-dirty pit fighter) way of attacking with your weapon, not a non-weapon unarmed strike.

The flavor text is unfortunate.

Note that if you don't allow weapon bonuses, the second attack is almost entirely pointless. You're losing so much to-hit (your weapon prof. and enh. bonus), why did they even bother writing the power as-is?