Hiya!
In my home-brewed system I call "Fantasy Elements", I came up with a system that I call "CPAGMEL" ("See-Pagmell"). Those are 'quality levels'; Crap, Poor, Average, Good, Masterwork, Exquisite, Legendary. Average is the baseline, obviously, and going down *quickly* denegrates the item...going up is not linear. The cool thing about this system is that it's used for ALL equipment. It does, however, rely most heavily in DM adjudication of something. Rolling natural 1's isn't an automatic downgrade, and getting your sword sharpened from an expert weaponsmith doesn't automatically upgrade. This system makes it easy for a DM to add those little "story things" that go on in, well, stories, but rarely in an RPG. For example, a party of adventurers slogging through a swamp for 5 days may have all their footwear "reduced by one Quality Level"; so if everyone had Average QL boots, they are now Poor QL boots. If they get reduced again, they go to Crap QL. If reduced yet again, they are destroyed and beyond any use.
Anyway...I have toyed with that for D&D, but I'm still unsure; D&D was never really about all that stuff. If focuses on heroic'ish adventures, delving into deep caves, slaying dragons and taking their treasure. Worrying about equipment degredation seems a bit off in it. That said...if you can find a PDF or hardcopy of Kenzer & Co's Hackmaster 4th Edition (the first one, not the latest), it has rules for armor and shield "hit points".
^_^
Paul L. Ming