For most of my seventeen years of playing variations of DnD, I have been a rules as written dude. I have always tended to avoid modifying the core of the game, aside from extrapolating the ability scores out to 50 back in 2nd Edition AD&D and starting bonuses at twelve (rather than sixteen or seventeen) after I read some prerelease info in a Dragon magazine about 3rd Edition. Actually, that was when I started modifying my game. I raged against the release of a new edition, but I ganked little bits and pieces of it for my 2nd Edition games.
Anyway, to continue. Back in 3.5, a book called Unearthed Arcana came out. There was a bunch of weird and interesting stuff in there, alternate classes and race ideas, different skill systems, flaws, traits, racial classes, sanity, reputation, taint, and so on. One of the systems introduced in the game is armor as damage reduction, rather than protection from being hit. So I read Unearthed Arcana and I really liked the concept behind armor as damage reduction. It made so much fucking sense. As I said once before, you don't put on fifty pounds of steel and heavy padding and leather to make yourself harder to hit (which isn't exactly what AC represents), you put it on so that that battle axe dulls its smile hacking through steel and leather before it gets a chance to let your rib cage see the light of day.
Anyway, so the concept boiled down to halve the AC of armor you wear (rounded down), that is your damage reduction from armor, subtract that from the armor's AC bonus, that is the new AC bonus of your armor. Do the same thing with natural armor, except divide by five (rounded down) instead of halving it. Magic enhancement bonuses increase the AC bonus, but not your damage reduction.
Pathfinder has a book called Ultimate Combat that also introduces an optional system for armor as damage reduction. It is just a wee bit more complex than Unearthed Arcana's system. AC changes to Defense. It has the ability to transform critical hits into normal hits, so there is this thing called a critical defense check in as well. There are also variations to the type of damage reduction the armor grants based on the type of armor you are wearing, and particularly large creatures can ignore your damage reduction. Amorphous and swarm type creatures reduce your damage reduction, but don't automatically penetrate it. You also gain a bonus to your damage reduction based on your level.
So Pathfinder's system is a little bit more fleshed out and comprehensive, but Unearthed Arcana's is a lot less annoyingly complex. I think if I were to implement a damage reduction system in Hekinoe, I'd use the simplified Unearthed Arcana version. I tend to like complexity (thus my love of GURPS), but my campaign book is already so full of subsystems (affiliations, traits, flaws, upgrades, magic misfire, and all my various alternate rules for the classes), that adding another fairly complicated system that alters a lot about combat seems somewhat abusive to my players.
It was always my intent to use armor as damage reduction back when I first started working on Hekinoe. When we started playing it in 4th Edition, I opted out of doing so to simplify things, as we were learning a new system. Plus, the healing surge system and generally high hit points of everything in 4th Edition kind of made durability a baked in feature of 4th Edition. When we switched to Pathfinder, I left out armor as damage reduction for the same reason, we were learning a new system.
As fond as I am of the concept of the armor as damage reduction system, I doubt my players care about it or need it as something to enhance their game, so it'll probably never appear in my games. Although, it would probably make Asosans easier to hit once in a while when Lance starts slinging kukris all over the place. With those long arms and two-weapon fighting feats, dude is like a gray-skinned Kali.