I'm about to remove all of my armor and sell it. It's expensive, it weighs a lot, the heavy armor slows down my characters, it will end up increasing energy weapons damage tremendously at some point, and it doesn't scale well at all with harder-hitting enemies and weapons, regardless of their weapons' Armor Penetration stat. I just took Armor Penetration 5 weapons off some soldiers in the Canyon, for example; 5 is the highest-value Armor available to me currently. 5 Armor will help a bit with the AP 3 revolvers enemies have already been using for quite a while now, but will barely make a difference against honey badgers, assault rifles, explosives, or anything that's actually a threat. In rare situations it might conceivably allow one of my characters to survive one additional attack, but I generally don't come that close to needing a trauma kit in the first place.
In the early middle of the game, with weapons dealing 30-50 damage per single shot and ALL having at least 2-3 Armor Penetration, let's say I'm wearing Armor 7 armor (I can't yet, it's not available; by the time it is, I suspect enemy weapons will do even more damage and have more AP). Shots from that 40-50 damage weapon, which deal an average of 40 damage each, will be reduced by Armor 7 to an average of 36 damage each. Occasionally it would mean the difference between life and death for a character, which is not worth immensely reduced mobility, reduced carry weight, and thousands upon thousands of scrap.
InXile (or more likely, modders) need to go back to the drawing board with this armor system. It's amusing that people criticized Fallout 3's simplistic damage/armor system, while WL2's has caught very little flak. It's not only straightforward, it doesn't even work properly. Massive armor suits barely make any difference at all in the long run, unless you count slowing down your people as "making a difference."
Off the cuff, what I'd propose would be a system in which when AP and Armor values are equal, the target takes 80% damage (it penetrates, but still its energy is reduced); when AP is 1 more than armor, the target takes 90% damage (barely puts a dent in the attack); and when AP exceeds Armor by 2 or more, the attack does full damage. When the Armor is 1 more than AP, the attack does 60% damage; when Armor is 2 more than AP, the attack does 30% damage; when Armor is 3 more than AP, the attack does no damage.
I just came up with that in fifteen seconds and it's better than the default armor system.