As far as my experience goes (and it doesn't go very far, which means I may be wrong) arrows don't do anything reasonable - they just are. Don't ask me why anyone bothered to place useless items in the game...
Hmm all together in my last game I found 5 arrows, at first I thought "Oh blast it don't tell me I need to buy arrows now" then found out that you don't need arrows, never bother to equip it (hah! don/t even know if it would equip in the shield slot or what) eventually got to the wastelands and still hadn't used it, so I sold them, and figured that some Bowman once had practice sessions all over Rivelon and didn't bother to pick up his arrows.
Then I chucked the whole arrow thing in with plates, dinners alchemy sets and other cosmetica.
In short my feeling they are just cosmetic items to make the roleplay a little more realistic.
Like in Daggerfall, if you got shot with an Arrow you would eventually find the thing in your inventory, as in you cut out the offending and sometimes painfull arrow and re-used it on someone else until it wore out <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />
