Quote:
Mitigation is the reduction of attack effectiveness. Types of melee and magical spell mitigation are absorb, armor, block, defense, resilience and resistance.
Not to be confused with avoidance, which includes such stats as dodge, miss and parry.
The crucial difference between the two being that an attack that is mitigated still does damage to the player, however an avoided attack deals no damage.
What you're arguing in your fourth paragraph is eHP, which is an equation that factors in mitigation to determine the effective hit points you have. This is not the same as mitigation. To calculate eHP, you would use eHP = HP / (1 - mitigation / 100), and you cannot take block/parry/etc into account, as these are not constants.