My point of view is that armor and tough hide both act in the way of a weapon trying to reach your inside, they should stack. If a weapon succeed in going through a piece of armor, then it will have to go through that hard skin before dealing significant damage.
So the same blow delivered to a Nagazi will have less impact upon his health than on a Human because his organs are better shielded by his tough hide.
Exactly what I was going to say.
To be honest, from a logical stand point I agree with both of you. Yes I believe that if a Nagazi was wearing armour and got hit his tough hide would provide better protection than a humans skin.
But, I'm not trying to preserve the logic of a situation, I'm trying to limit what I see as a threat to game play and game balance.
My argument is simply that things such as Tough Hide stacking with armour, Mage armour (or others) stacking with armour, Mage armour stacking with Chi Defence will cause an imbalance within HARP. The way I see it is these things are allowed to happen, next you'll want Warrior Mages with wall shields being able to cast wall shield as a spell and getting a further +40 DB.
I just feel that, if these things happen, PC's will quickly out strip monsters and even a Dragon's fearsome 190 lvl 25 OB will be pathetic compared to the armoured, tough hided, blade turning, masterworked, alloyed, mage armoured, boost quickened, blurred, battle runed, hasted, dirty fighting PC that will only be challenged by the Gods themselves.
At least, that's my GM nightmare.