I've used several methods over the years, but the one I really like I have implemented in to my own system. Unfortunately, the system wouldn't directly work in standard D&D due to the high damage potential characters have. A reasonable approximation that might work well in D&D would be the following:
* Armor grants DR equal to the armor's standard armor bonus, but does not grant an AC bonus.
* 1/2 the armor penalty minus 2 is applied to AC (it's harder to dodge and parry in heavy armor)
* Natural armor bonuses only grant half their natural armor bonus in DR.
* Shields still grant AC bonus.
* If a character takes damage equal to or exceeding twice their Constitution score (after applying DR), they must roll a Fortitude save (DC 10+number of points exceeded) or die.
* Improved Dodge feat grants +4 dodge bonus to AC. Can be taken multiple times. Might want to slap that on Fighter bonus feat list, but then, maybe not.
* Crit multipliers are reduced by one, but ignore DR from armor.
HP are healed at a rate of one per level per hour of rest.
The game definitely felt more realistic and made for people thinking more tactically, rather than just attack, damage, attack, damage... lots of fighting defensively and doing wacky things to fight effectively.
Slightly more lethal system overall, but the group can withstand multiple encounters better (due to the accelerated healing).
[edit] Almost forgot:
* Heavy armors (other than full plate) make crits less likely. They must be confirmed with another natural 20.
* Full plate grants crit immunity.
* Crit threats ignore armor DR as well as crit hits.