Sorry dude for some reason I missed your reply.

The look out rule's key is in the wording. A guy I dont know on the 40k online forums has this to say about it and its better than I could put it.

"You can allocate 2 wounds onto one bodyguard. In fact, you can go a step further. Let's say that your Command Squad has been shot up and now it's reduced to just the Commander and the Bodyguard. A squad of Marines shoots at them and 5 wounds with Bolters. You go back and forth distributing two wounds to the Commander and then three to the Bodyguard. Then, the Look Out! rules lets you give those two wounds to the Bodyguard, who then dies 5 times over.

Not exactly what the Marine player was expecting!"

So to now quote an explanation.

"Determine how many hits the unit has taken
Determine how many wounds the unit has taken (using the unit's majority Toughness)
Allocate wounds to individual models (one per model until everybody has taken one, then two per model until everybody has taken two, etc.)
For each group of identical models (i.e., same wargear, statline, and special rules), roll all saves at once, and kill as many whole models as the nature of the failed saves permits

This is the sequence for all units.

As I read the codex, "Look Out - Arghh!" intervenes only at step 4. As the rule says, "Whilst a bodyguard is alive, each time the Command Squad is wounded by the enemy, up to two wounds allocated to the Company Commander are instead resolved against the Bodyguard(s)." Importantly, the wounds are still allocated to the Company Commander. Consider the example a Command Squad consisting of one company commander, four identical veterans, and two bodyguards. The unit comes suffers fourteen savable wounds. The following occurs:
One wound is allocated to each of the company commander, the four veterans, and the two bodyguards. Seven unallocated wounds remain.
An additional wound is allocated to each of the company commander, the four veterans, and the two bodyguards. Each model has now had two wounds allocated to it. No unallocated wounds remain.
Because the four veterans are identical, the IG player rolls all eight of their saves together. For each failed save, one veteran will die.
Because at least one bodyguard is alive, the IG player can choose to have the company commander's two wounds allocated to the bodyguard(s). The bodyguards are identical (and always will be), so it makes no difference whether one wound is assigned to each bodyguard, two wounds are assigned to one bodyguard, or the two wounds are assigned to the two bodyguards collectively.
Because the two bodyguards are identical, the IG player rolls all their saves together. The bodyguards must make six saves - four for the two wounds that were allocated to each bodyguard, and two for the two wounds that were allocated to the company commander but are resolved against the bodyguards. For each failed save, one bodyguard will die.

Two important things here:

The first is that the the text of the rule allows "Look Out - Arghh!" to apply to only two wounds per attack ("each time the Command Squad is wounded"). "Bodyguard(s)" indicates that the rule applies as written whether there is one bodyguard alive or two.

The second is that identical models always roll their saves together. Because that is true, it's an academic distinction whether one bodyguard is allocated one wound and the other is allocated five, or whether each bodyguard is allocated three, or any other combination. The two bodyguards will always roll their saves together (because there under the codex they are always identical to each other), and for each failed save, one bodyguard will die.

So what is the benefit of having a second bodyguard, if it doesn't allow you to allocate more than two wounds from your company commander? First, I'll note that because you have to allocate one wound per model, the number of wounds your command squad would have to suffer from a single attack to even allocate four wounds to your company commander is very large (even if the command squad was down to the company commander and two bodyguards, you have to suffer seven wounds before you are even allowed to allocate a third wound to the company commander). Thus, one of the advantages of the second bodyguard is that it's another body in the squad to which you can allocate wounds before you have to allocate any to the company commander at all. The second advantage is that if the bodyguards collectively only fail one save, you still have a bodyguard alive."

Against the Eldar Battle Force? So whats that Banshees or Avengers? Guardians, Heavy Weapons, the Skimmer tank thingy and a Spirit Warrior or a War Walker or something?

I think I would be inclined to take more infantry with a heavy weapon stand of Auto Cannons. Not Stormies. A Russ is always a good choice too but against Eldar I prefer to have more shots from Infantry than Tanks and specialists. If you do take a Russ against Eldar got for an Exterminator with HB sponsons or a Punisher with HB sponsons. Lots of shooty death that will cut through Eldar. My preference would be the Exterminator. Punisher is better for Orcs and 'nids.

Alright thanks! Now I totally see how that rule is useful. I think that's about all the questions I got. May your dice always roll 6's unless your using a psyker. XD

No problem TBH the guys from 40K Online cleared a thing up for me with that question too. I always thought it was pointless to have 2 bodyguards.

Anyway looks like I will be finally getting a few small scale games in soon. A couple of my mates who havent played 40K before got into it through Dawn of War and Space Marine and are now trying the table top as Imperial Fists and Chaos Undivided of some sort so i've dug out my boys. Which also means I can post some off the cuff photos i took when I was getting them out the attic as promised.