Of course armor getting shredded and weapons shattering would only happen when the item hits 0 health. People who played Dark Cloud know how in that game when you ran out of WHP your weapon would break and vanish, likely leading to a swear from the player. The second one fixed this by making the weapon unusable until repaired. But really when armor or the weapon hit 0 they should break, forcing you to find or buy a replacement.
Would this svck if you're in the middle of a raider camp or fighting a dragon? yes. But it would certainly add more challenge and realism to the game. You'd have to really pay attention to and take care of your equipment to avoid finding yourself in a bad situation, perhaps even carry some backups. This could happen to enemies as well, though it'd be less likely since they only have to use their equipment for the one fight against you while you have to use them in a lot more battles. Disintegrate weapon and armor spells(if their in) would look alot more dramatic when they cause equipment to fall to pieces rather than be dropped or unequipped by the target.
Perhaps magic or enchanted equipment wouldn't fall apart because the magical energies keep the item from breaking completely. Imagine fighting an enemy when on the next strike your weapon snaps in two. Maybe a perk in the game could allow you to plunge the remainder of the weapon into the foe for a final attack with that weapon. I'd like to know everyone's opinion on a feature like this.