Well, I hope that this is OK; it has 3 parts but it is all very closely related so I won't split it up unless I'm told otherwise.
1) The simplest part: for the love of god why do arrows damage animal quality? It means everyone is doing retarded dancing around with boats and swords instead of using bows. Animal q is already hardcapped by survival, I think thats probably enough... I'm 100% sure that this has been posted before, but I think it needs repeating until it is changed . Archery should, I think, be the normal way to hunt.
2) Hunting used to be reasonably rewarding when you could sell stuff like DDD and WWW. With the new food system (which I won't complain about, since I'm not an expert player in that regard), its basically impossible to sell any hunting products. I think that, similarly to the teddies, there need to be some crafted curios that require hunted components, and that are scaled appropriately so that they can compete with the "indoor"/agrarian crafted curios. This would create demand for hunting, and also improve the economy by providing another thing for newbs like me to provide more developed players. I'm not going to make specific suggestions, since I have no idea about the details of balancing this.
3) Hunting mechanically has been essentially the same the whole time I've been playing, and could really be reworked to be more interesting. For example, we really need to be able to use those bloodstains to track our prey; the system could be the same as criminal tracking, with you picking up scents from the bloodstains, and using them in conjunction with prc*exp. One could even have random animal scents found in the wilderness lead you to transient animal "dens", a patch of (to the naked eye) normal terrain, where if you right-click an animal scent onto it from within sight distance, spawns an animal of the correct type. This would largely replace the current system where anyone can spot all animals all the time. Also, it might be nice if stealth played into hunting, so that if you shoot an arrow into (or just approach) a creature with some "stealth toggle" engaged, it has a chance to not detect you (it may still panic, of course).