Attacking any part of a creature deals hp damage to it. That is part of the massive abstraction of the hp system, and hardly the most strange aspect of it. I think you're confusing attacking limbs with SNEAK ATTACKing limbs. It's sneak attack that says you must strike vital areas and extremities may not count. General melee smacking has no such restriction.
So yes, the feat is awful, one of the worst in PF. Not only does it lock behind a feat something most considered a thing you could freaking do already... it locked it behind a feat with a goddamned BAB +11 requirement, because fuck martials. Why should they get to ready to hit a giant's arm before the wizard can cast True Seeing, Contingency, or Flesh to Stone? The former is totally more powerful than the latter.
EDIT: We're not talking about on your own turn, full attacking from some arbitrary distance and ignoring the rules of reach completely. We're talking about specifically readying an action, which might never pay off, to strike the dragon's tail the exact moment it has placed it within your threatened reach. Should be obvious, but I'll state it just to be sure everyone is following along.