for large projects, usually separate because you have different types of engineers working on the different pieces.

for example, maybe the hardware group puts out an Interface Control Document for an item, and the software group refers to it and accounts for it in their design.

also, you would expect the hardware to change less than the software, changes being much more difficult, and at some point the hardware will be frozen where the software does not have to be (you can upload patches, and upgrade software before and after h/w assembly, etc.)

re medical devices, i think there has been some discussion about those on this site before, you may want to search just for "medical".

james