1 & 2 are pretty much given. 3 probably. As for AP bullets, it's possible, but it's a different can of worms, would be better to consider that later.
Ok, forget I said AP bullets (not sure myself, it's not like you're going by RL), the notion is general: the idea is nice but the way your system works makes things that influence armour not so interesting unless very potent.
Better armours have more condition points, so that will help them maintain condition.
Oh, I see, got it mixed up. So hits do point damage right? Like a hammer doing 2pt armour damage will mean -30% for armour with 6pt durability, but only -20% for the one with 10pt durability?
Must they always upgrade into the better though? Like a shopping list - buy components, mindlessly upgrade, gradually less vincible in battles.
Hadn't thought it through, probably stupid - can imagine one well-round armour (some crafting skill + materials + considerate time cost). For example:
Base armour: 5 CTH rating, 15% melee, 15% firearm, 15% explosive resist, 8pt durability, 6kg weight
Then the game offers upgrades or specials - with a higher pros & cons and price, need a high Crafting skill, a high lvl workshop upgrade, a rare material, or can only be looted from a boss. The way, so you're able to get hands only on one or two such armour pieces at max in a game.
Some examples of specials (numbers totally wrong, just trying to think of pros & cons):
Soft body armour: 0 CTH rating, 15% melee, 30% firearm, 15% explosive resist, 6pt durability, 6kg weight
Hard body armour: -10 CTH rating, 30% melee, 45% firearm, 30% explosive resist, 8pt durability, 12kg weight
Liquid body armour: 5 CTH rating, 0% melee, 60% firearm, 15% explosive resist, 5pt durability, 5kg weight
Blast-resistant suit: 0 CTH rating, 0% melee, 15% firearm, 60% explosive resist, 8pt durability, 12kg weight
Ceramic armour: 0 CTH, 100% melee, 100% firearm, 100% explosive resist, 1pt durability, 8kg weight
Plate armour: -15 CTH rating, 60% melee, 15% firearm, 15% explosive resist, 10pt durability, 18kg weight
Camouflage armour: 30 CTH rating, 0% melee, 0% firearm, 0% explosive resist, 4pt durability, 3kg weight
I'm not sure what that is, but if you want to give me some info, I'll weigh it up.
Perhaps used wrong keywords. Just shortly simplified damage part: protection an armour offers can be either percentage/fraction-based, so hits always go through unless 100%; or threshold-based reduction, so any hit with a low penetration value (under the threshold) won't make it through (those over threshold may be reduced by a certain amount). Or it's often some combination of both, etc. Does make a better sense now? Not practical to theorize further though. It's not like you're sharing with us design goals (that's not a criticism, it's understandable). Not that it ever stopped me from wasting time.