It's no more bookkeeping than if you try to actually use hardness and item-HP to keep track of who's equipment is getting broken.
Also, the broken-armor thing is well...kinda broken. If you are fighting a group of creatures, and you can expect to reduce their number (and incoming damage) each round, then maybe your steadily-breaking armor might keep up. But if you are fighting a single large enemy that will take several rounds to die and they manage to overcome 130 damage in one round, then it's only going to get rapidly worse from there. It's an interesting idea, certainly, but I'm just not seeing how it might work yet.
Edit: What exactly is the "damage resistance" problem you mentioned earlier? I just posted a major update to my own armor-thread earlier tonight and DR figured into it very heavily; I'd love to know if I've missed something horribly obvious (again).