Hmm, I think I see the confusion. Are you sure you are reading the non-D20 version of the rules. Remember, there are 2 versions for this game and we are using the D6 (non-D20) variant.
For Medium And Heavy weapons, it is explained on p.28, but if it's not clear, I can do a summary of the rules here.
Both M and H weapons inflict D6 damage, but M weapons represent separate smaller attacks, so each D6s are applied separately against the opponent's DR. H weapons represent a single powerful attack, so each D6s are added together as a single source of damage and as such the opponent's DR is applied only once.
As for the -1 penalty on the flurry of Blow, I see no such thing on the non-D20 version of the rules on p.21 (unless there was a change in the pdf since I printed them?).
Finally, if you wanted to Flurry and gain an Extra HD from your fist technically being a VL weapon (despite their ability to inflict L, M, and H damage), you'd apply the -1 penalty on all attacks.
Hope this helps.