Is the doctor's bag + 7 hours of sleep suppose to restore limb health to 100% with hardcoe mode on?
seems to work with Hydra though
Also how does the pc get "Well Rested" with hard core mode on?

Sleep have no effect on Limb Health at all. Go to the status screen and direct apply a Doctors Bag to the limb in need directly like you do with Stimpaks in F3 and/or Standard Mode
Well Rested should be gotten when sleeping inside in a safe zone

Source: http://fallout.wikia.com/wiki/hardcoe_mode

In hardcoe mode: Sleeping doesn't restore health or limb condition but Hydra does. Also, the Well Rested bonus can only be attained by sleeping in owned or rented beds.

There is a slight exception and it's one I abuse into the ground.

Sleeping in a bed the player owns (Identified as "My bed") does restore limb condition and health HP. Novac Motel room, Atomic Wrangler room and the high-roller suites on the strip qualify.

Don't forget safehouse beds.

It dose to me if your character has a owned bed. My character has two owned beds. In Novac and at Garret's if you go quest for them. If you sleep more then eight hours on those owned beds you get healed. The bed you don't own you don't get healed in hardcoe.

edit:Doctors bag will heal your limbs including your characters melon. If you go into stats, player you see the outline of you character all you have to do is to press 'e' which is the doctor bag on the crippled limb and it will heal most of it. That depends on your Medicinal skill.

Doesn't getting into Red Lucy's pants make all your limbs better ?

Think I read that some place...

Ahh, mystery solved! Every now and then I was wondering why my characters limbs were getting healed. To be honest, I got into the habit of hitting the Doc at Novac and then going to sleep so I did not pay it much attention. Figured it was some glitch. I like the doc there, a funny reference to Fallout 3

The Kings beds, in Freeside are also considefed owned by the player, that is one cool dude.