dead_radish said:
To go back to the original point - Yes, you're going to do less damage.
Two weapon fighting really hoses you on damage potential if you go straight fighter. You hit less often, do less damage with each hit (compared to two-handing), and have to spend lots of extra feats.
Honestly, what you need to do it take 1-3 levels of rogue. I know, it's odd, but that gives you +1d6 or +2d6 damage when you flank. With two weapon fighting, you have to have large enough bonuses to your damage that the extra attack does more than a single two handed attack would. And start using your attacks to sunder, trip, disarm, etc - that's another benefit. If you're getting magicked, try for greater magic weapons or bull's strength. And try to get flaming or the like on your weapons.
Check out this page for a huge breakdown of how to make twf effective:
http://homepage.mac.com/guyf/DnD/AttackingWithTwoWeapons.html
That link is good, but overly simplistic. You don't have to have sneak attack or energy weapons to do good damage while dual wielding.
One thing often ignored in these discussions are crits. If you have a good crit range combined with your str, magic and power attack, you'll do impressive damage once you hit higher levels.
Unfortunately, one of the things required for maximizing your TWF is two good magical weapons (or GMW x2), and I think your problem in that area has been well documented. You're also going to take a hit because you're not using two identical weapons. However, the shield bash combo can also be really effective from a survivability standpoint so you're doing fine.
Make sure you take power attack. At higher levels, go for Imp Crit, ITWF and Greater Two Weapon if it's allowed. I would keep working on your shield with feats and abandon the Handaxe. They do the same damage and the AC bump is really nice. When you hit higher levels, use the shield as primary, but when you need to deal a buttload of damage, break out a second Dwarven War Axe. You'll have to be careful on when to do this however, since you'll be taking larger penalties.
Your DM allowing Imp Rapid was a big mistake. To balance things out again, that imp ambi feat sounds good. Be advised though that you're both going far off the "balance" track with those feats.