It wouldn't require a hell of a lot of thought to make a system that was both elegant and efficient.
Not that difficult.
I immediately stop reading when I see words like this in a post...
...None of us know a damn thing about game design...Don't embarass yourself...Just because you may have tweaked something on the Construction Kit doesn't mean you know how that goes down...
And I'm not sure how "immersive" or "realistic" it was anyway, to have to repeatedly (while wandering around a dungeon) "fix" your Leather Shield by whacking it with a pile of hammers you carried around in your pack.
If you think about what actually goes into repairing broken blades...it usually means reforging metal, or replacing parts entirely. How does a local blacksmith fix daedric armor?
"Sorry m'lord, I don't have the necessary arcane know-how to understand this piece. You might try praying to a shrine for the Daedra to repair it maybe."
For better or for worse, depending who you are, they probably didn't want to make something as rudimentary as...Armor Repair...a very complex system. Believe me, I could TELL you how to make it complex as hell. It's armor repair, a basic function. Going to the Smithy is not an "experience".