In what direction are armor, weapons, and other equipment heading in the future?

[lun4tic]

How much of a penalty is applied? Enough to make same-rank equipment a better choice?

[Wynn]

How much of a penalty is applied? Enough to make same-rank equipment a better choice?

Usually, yes. Though some people have reported they have seen instances where equipping the higher gear was better. I personally have never seen that unless you are already within a few ranks of the optimal rank.