details, details.
(It's probably worth nothing that the campaign I'm contemplating this for uses a class Defense bonus.)
I can infer that the armor intercepts the hits that the wearer takes and then the damage goes to the armor, eventually degrading it to the point that it breaks.
Yep. Characters are hit more often, and any damage over the armor's hardness is inflicted on the armor.
For example: A 5th level fighter in fullplate (standard AC 22) would have an AC of 14, and any hit to the fighter over at least 10 hp would damage the armor, until the armor had taken 40 hp of damage, at which time the fighter gets damaged directly, without benefit of the armor's hardness.
However, what about up until this point? Does the character suffer any damage?
Not unless they're attacked by energy attacks, or gappled, or struck with a critical hit. (Sneak Attacks would probably become a Full Round action, that are reduced by hardness but then strike at the character.)
If this is the case then a shiny new set of platemail put on right before you face the BBEG could prove to be very anti-climactic.
Not any more than casting a
heal spell, or fighting a BBEG who attacks with death magic.
If you don't want the armor to be reduced to scrap metal in no-time, you need to set the hp and stuff high enough for it to sustain many hits. This means that a simple "you're hit when the armor is destroyed" won't work, since it would take forever to wear it down during which you are invulnerable to hits, and then suddenly it would be worthless and you are getting stubbed while effectively naked... I don't think that's the effect I want armor to have.
D&D already has rules for the HP and hardness of armor: hardness as the material, HP = 5 / point of armor bonus. Magic increases this.
And, in this variant, armor can be bypassed by energy attacks, critical hits, sneak attacks, or grappling. Some weapons (such as a mace) may be able to attack through armor as well.
A better mechanic, I think, is that the armor should sustain some damage but have a threshold over which damage is conferred to the wearer, say like stoneskin. While this is workable, it is essentially a sytem using armor-as-DR (which are notoriously difficult to do right) plus an armor-attrition system.
That's actually the beauty of this--the armor doesn't grant DR, so it doesn't greatly change the system.
The next step is to flesh out the system, playtest, and check the math. I'll keep this thread posted when I get a chance to flesh out the system a bit.