I think it's less important to condition the knuckles then it is to develop solid structure of the weapon.
In a real combat situation, the thin skin over the knuckles will probably be torn open anyway if you use any significant amount of closed hand strikes. With the adrenaline and endorphins you will most likely have coursing through your system, you won't even feel it. However, being able to deliver powerful strikes without sacrificing weapon structure is key to power transfer. I like to practice punching hardened targets not so that I can develop a pain threshold, or tougher hands, but so that I can develop the ability to strike a resisting target, with a great deal of force, while maintaining proper weapon structure and alignment. I've learned the hard way what happens when your wrist bends under load, or when your fingers roll and collapse into the interior of your fist. Ouch.
As a side note, I think it's equally important to practice striking soft targets. I've found that bricks may hurt to punch, but in some ways their hardened structure allows for a more solid strike. Heavy bags and focus pads can give in unpredictable ways which can also cause your weapons to roll on you. Since humans are made of both hard and squishy parts, and they are my ideal striking surface, I find it useful to train on both types of targets.
-Rob