I know you said it was pseudocode, but to shed some more light on it, I altered some things.

Problems. Revised Code:
Code:

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function hitEvent()
{
   if(event_type == event_entity)
   {
      if(you == player)
      {
          player.health -= 50; //reduce player health
      }
      ent_remove(me);
   }
   if(event_type == event_block)
   {
      ent_remove(me);
   }
   return;
}

action arrowFly
{
    var arrowCounter=0;
    my.enable_block = on;
    my.enable_entity = on;
    my.event = hitEvent;
    my.passable = on;
    while(arrowCounter < 100)  //play with this (arrow's flight time)
    {
       my.skill20 = 10; //play with this (arrow's speed)
       my.skill21 = 0;
       my.skill22 = 0;
       move_mode = ignore_passable;
       ent_move(my.skill20,nullvector);  //or use c_move
       if(vec_dist(my.x,you.x) < 50)
       {
            my.passable = off;
       }
       wait(1);
       arrowCounter += 1;   //arrowCounter must increment to prevent dead loop
    }
    ent_remove(me);
}

action arrowBox
{
   var counter=0; // counter has initial value of zero
   while(1) // continue firing indefinitly
   {
       if(counter == 50) //play with this number(amt of time b/t firing an arrow
       {
           you = ent_create(arrowMDL,my.x,arrowFly); //create new arrow
       }
       counter += 1;
       if(counter >= 50) // if counter is GREATER than 50 (or equal), reset
       {
           counter = 0;
       }
       wait(1);
   }
}

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