Responding to both here: The problem with DR is pretty simple. DR applies against each attack individually, and does not scale. At low levels, a few points of DR can make you immune to a literally infinite number of goblins. On the other hand, at high level that same few points of DR doesn't do a thing for you.
The other problem is that DR is more beneficial against enemies with lots of weaker attacks, and much more susceptible to a single big attack. This means it inordinately hurts two weapon fighting, monsters with lots of natural attacks, or hordes of weaker creatures.
The refreshing temporary HP pool makes sure that the damage blocked remains relatively constant regardless of enemy type, and the level based scaling to HP lets it stay relevant even into late game levels. As long as the enemy is capable of dealing at least as much damage per round as your armor can block, your armor is useful, but isn't making you immune to damage. And any on level challenge should be able to do that without too much trouble.
Oh one other benefit of the temporary HP: It also applies to damage dealing spells, and not just melee attacks. Some people may consider this a negative, but I think it's a good thing.
Like I mentioned in my edit above, I'm not totally sold on the degradation mechanic myself. It was put out as an option if you want to allow the eventual wearing down of armor, so it's nearly impossible to be completely immune, while still giving a fair amount of protection. (Consider +5 Full Plate at level 20. You start with 130 blocked per round, second round it's 120, third it's 110, and so on. Even with the armor getting worn down each round, the armor overall blocked 910 hp damage, which is a huge boon. But combat probably shouldn't last that long, and it would only matter if you don't get the few minutes to fix the armor before moving on to a new combat.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.