Wounding sets the damage at 2. Period. So it's good for people who have a low or negative physical trait. Where as sharp adds a +1 to their physical, so someone with a 2 in physical will do more damage at 3. You can put wounding on any weapon, keeping in mind that it just does 2 damage.
Far/Hand/Close are all narrative tags to cover weapon choice and will alter how the battle plays out. Hand weapons will put a hero directly in danger but also more in control. Close weapons means the monster might have to move, or choose a different target to threaten if they can't reach. Same with far. Since the conflict is a narration, the tags help inform and control what can narratively be done.
Does that make sense?