Manbearcat
Legend
It seems to me that, more-or-less by definition, the most enchanted plate armour would be the toughest thing there can be. So a dragon's skin being tougher strikes me as verging on incoherence within the context of the fantasy genre.
Gygax dealt with the comparable issue in respect of hit point ratios by saying that, when it comes to high level fighters vs horses, much of the hit point total is abstract "metaphysical" hit points. It seems to me that, desite the system's surface protestations to the contrary, the same must be true of natural armour in 3E. (And as I posted upthread, the same is also true of Lolth's -10 AC in AD&D.)
My take on the 3.x natural armor escalation (specifically for dragons through their age continuum) is that it is a kludge for curve fitting (in the same way that aerosol values are a kludge for curve fitting with high resolution climate models). The physical portions of the 3.x dragon models are fundamentally outcome based design, same as 4e. They needed escalation of all of the various metrics, to make the dragon more physically potent in all the "right ways", while they simultaneously needed dex and touch AC to stay at a tightly bound, low number. How best do you accomplish this? Not some sort of magical deflection bonus (as that inflates touch AC). You accomplish it by an escalating natural armor that allows for the curve fit you're looking for.
Edit: In case it wasn't clear by my above statements, escalation of natural armor (the "kludge" in the formula) serves the purpose of escalating the physical math of the dragon in proportion to the math of the heroes that they will be facing. The problem is (i) their obscenely low dex and touch AC makes them vulnerable to non-save touch spells and/or dex damage and (ii) their actual CR number is utterly turned on its head by their concurrently escalating sorceror level. So they don't serve their purpose as fire(etc)-breathing behemoths with claws that rend and teeth that impale and wings of a hurricane. They're outrageously vulnerable (to certain spells and certain poisons), giant, flying, scaley sorcerers. Their brawny physical stats become almost entirely irrelevant in the rocket tag that is epic tier 3.x.
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