Finished it now vs bots. Seems like only direct impacts do count and also, not the first fire damage but the damage, the "rubber bullet" itself is dealing. Be lucky and you get 25 dmg per bullet with a headshot.
Good point I disnt realize upon posting initially. I completed the challenge a few days ago but it took roughly 40-50 hours of running the launcher in your loadout without only focussing on just grinding the damage or going the bots route.
The direct hit seems to deal 12 damage consistently for me, but with the bad hitreg even that did not count all the time.
All in all, its still a nice gadget that has its use case but the challenge is really annoying.
