Sorry for the delay. I was heavily involved in doing histograms, probability density functions, and posting elsewhere about breathing. Any one of those activities will severely tax your time...
Thanks for the question, Tracy. It's a good one, and I've been seeking an answer to it for decades. My personal belief is that we are looking at a multitude of reasons for the beneficial response to targeted conditioning.
1) The "hidden vein" theory is an interesting suggestion. I happen to be one of those people who - in spite of 3 decades of kotekitae - still have veins that make a phlebotomist very happy. Generally hidden veins are a sign of high body fat. But there may be
something to the theory, albeit on a small vessel and not large vessel level. It probably is due to an increase in connective tissue as a result of the continuous mechanical stimulation. Yes...this is similar to callous development, only on a very thin and broad level. So individual cell membranes may not be any stronger. Rather the capillaries and venules in the forearm are protected by layers of connective tissue that naturally develop as a response to the mechanical stress.
2) Whether you realize it or not, there is most definitely a short term effect. For instance, experience will show that one decreases the risk for bruising in kumite by first starting with ("warming up" with) kotekitae. How can that be? Easy... The response to many physiologic states - such as exercise and stress - is to decrease the clotting time. In other words, you plug the "holes" you make from microtrauma so quickly that you never see a bruise. You may still feel just a touch sore the next day, but you see no bruises. You are no worse than you would feel from a weight training routine (which is also known to cause microtrauma).
3) This one may make the chi-sters happy if they take what I say, squint their eyes, and translate to their own domains.

I truly believe that part of the benefit of kotekitae, ashikitae, and even stomach conditioning is to learn how to "reflect" the energy. If an attacker is successful, then his strike will result in an
inelastic collision. This means that the recipient of a strike absorbs energy from the strike, and this energy is released by breaking bonds in tissue. However, well conditioned (coordinated) athletes learn to make these collisions more and more elastic. It's a matter of knowing when and how to contract the right muscles at the right time. The effect of hitting someone who has this down is a lot like trying to damage a properly inflated basketball by hitting it. I know for a fact that I "hurt" many a beginner that hits me hard in kotekitae, thinking that the energy will go into me. I find it comical when I get that look from someone who has hit me hard in the stomach or on the forearm and they suddenly realize that
they were the one that just got hurt. Anyone who is experienced at this exercise knows how to do this. Thus when you get good at it, you don't really absorb very much energy at all. Increased skill at this has something to do with voluntary actions, and also something to do with higly-trained, involuntary reflexes (the stretch reflex, where responses are proportional to dL/dt of the muscle).
Anyhow, that's my stab at it.
- Bill