Also remember that against a CR20 monster, he's either not being attacked via HP at all, or he's probably being attacked for several hundred HP a round anyway. This just makes it possible for him to actually take the hits, rather than needing to stack up lots of miss chances to avoid them or make the enemy dead before they get a counter attack.
Of course, it makes characters ridiculously easy to hit (just like all armor-to-DR or armor-to-HP systems), and that whole "don't give a damn about AC" problem kicks in at even lower levels than before, and certain players low-level players may not enjoy giving up a 30% chance to avoid all damage in exchange for 3-12 HP.
Well that is why I mentioned it working better if using a RNG fix similar to what Legend has, giving BAB as a bonus to AC and capping itteratives at -5 like monster attacks. This keeps AC at least somewhat relevant though obviously still with things weighted towards light armor users for dodging, while heavy armor users are probably still getting hit around 80% of the time.
It is a bit more book keeping, but it's a manageable amount. The X*Y/2 should only come up once a level, and after that you only use simple subtraction (assuming you use the degradation option, which I haven't sold myself 100% on yet). It's even easier if you just use X*Y and eschew enhancement bonuses (or have enhancement bonuses on armor go to AC even though armor itself doesn't grant AC anymore. Though that feels a little weird)It's a bit more bookkeeping ("did you remember to apply your armor HP bonus this round?" and "What's 5 times 7 divided by 2?"), but that's actually quite cool.