The 'heals immediately' idea I leave for things like Fast Healing and Regeneration.
Damage Reduction is a difficult concept to work with sometimes due to its nature of being somewhat inbetween natural armor and fast healing / regeneration. Typically, it seems to be used when the weapon should not affect the creature for some mystical reason. A silver weapon should harm a werewolf, so a non-silver one does not. However, in legends this was typically represented by the wound closing up even as it formed. The problem with using this, however, is that by the legends no damage should occur at all, rather than merely reduced damage. If we wanted to follow the legends more exactly, we would track the damage separately*, but that would be more effort than a fun game is worth. As it stands, DR as described (ie: doing less damage) is more evocative of armor than the "fast healing if caused by any source other than _____" of legends.
* By tracking separately, I mean the following:
Suppose a creature with 20 hp, DR silver, is attacked by two individuals - one with a silver weapon, one with an iron weapon.
The first round the creature takes 4 dmg from silver, 5 dmg from iron, for a total of 9. The creatures heals - say 3 pts per round - dmg caused by non-silver. Also, the dmg caused by non-silver cannot result in death - merely unconsciousness. So at the end of the round the creature has 6 dmg, for a total of 14 hp (16, -2 from non-silver). The next round the creature takes 5 more dmg from silver, but the iron wielder deals 11 dmg (crit). The creature has 11 hp, but due to non-silver dmg of 13 (11 this round, 2 last round not yet healed) it appears to have -2 hp and is unconscious. If the attackers turn away, thinking the creature vanquished, they will have a nasty shock next round as at the end of this round it will heal 3 non-silver dmg, restoring it to a seeming of 1 hp (still only 11 true hp, as non-silver dmg is tracked separately).
This is something a bit similar to regeneration, in a way, and it is much closer to the 'DR' of legendary monsters rather than what is currently used and meant by DR in the game. The current version (damage decreased by ___) is more akin to an armor variant rule stacked on top of current armor rules, thus giving the impression of an attack bouncing off and causing no harm, rather than the tension of an attack that seems to cause harm - but after a round or two has healed over.
How many, I wonder, would like it is DR was replaced with something akin to Regeneration? (ie: all damage is still counted, but unless it is by the type stated in DR it causes non-lethal damage, and if the creature is reduced to -10 by such non-lethal means its healing will eventually all it to fully recover, no matter how damaged it was)
There is one difference between traditional DR vs game Regeneration. In the game version you have to state all energies, etc that can by-pass it, while traditional DR tended to just presume that all energies the creature was not immune to would by-pass it. Werewolves could be burned, for instance, despite the fact that only silver weapons could harm them.
It actually went a bit beyond merely 'harming them,' however, as some legends suggested that wounds caused by silver were slower to heal - or might not heal at all (other than stopping bleeding, eventually). I wonder if that would weaken the power of Regen, if damage caused that cannot auto-regen (at the stated rate) took twice as long to heal as normal?