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The benefit is less clones. The different armors for one class follow the principle of replacing one material with another as the gear gets higher level (cotton->canvas->velveteen->wool->felt, to give an example)
Keeping the limits on "fashion" gear the same as when being equipped as normal gear doesn't break immersion at all. For mages, all type of cloth offer same protection against damage, for battle classes it's mostly cloth and leather mixed independent on their level, for the heavy ones it's different metals. And that's the only part where you could argue "it doesn't make sense since bone is "softer" than bronze and bronze is "softer" than steel".
I personally don't see a problem.
I'd prefer to have a separate slots for "fashion" gear over having to meld the stats from one item to another.
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ya i don't see how it breaks immersion, think of it similar to dress spheres or whatever. You don't see hundreds of people around wearing identical clothes, tapping them on there back and going "oops wrong guy, this is the 50th person today"
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Thanks for the replies everyone, i've updated the OP with more info and better clarification.
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Always liked skin swaps for armors. I seem to always like the look of the worst optimized armor in games.
I would also like to see my dye color options. Some things can only be dyed say green, yet i'd like a purple version.
Color choices for "all-purpose" dyes seems extreamly limited :(