AE's explanation for why fall damage can't be implemented is that there is no server-side world model. Without the world model the server does not know that a character is "falling".
Perhaps a solution to this would be to have fall damage calculated client-side instead of server side, because there is a client-side world model. Its what causes your character to "fall" when you walk off a cliff. Fall damage could be calculated client side and then the result sent to the server to reduce the player's health.
Sure, such a system is less secure to hacking than having everything server-side, but the benefit may well outway the risk.