This sounds good in realistic terms, and also implemented in many fantasy games, but I don't think it's a good idea for Elemental.

The major advantage of the game is to give the user flexibility in unit design. Limit the options and you hurt that advantage.

If I have limited resources and I want to create a balanced army, it is reasonable anyway that I give the better armor to the front line soldiers and save the iron by giving weaker armor to the archers. But if I have enough to spend and I want an armored archer, why limit the option?

Maybe deciding that heavy armor reduces either attack or moves in a more significant way will encourage me to have archers with lower armor rating.

But I think this should be encouraged, but not forced.

Reduced attack or combat movement would work. Allow them to have the protection but at a cost to effectiveness.

I feel strongly that unit types need to have strengths AND weakness.  This creates opportunities for choices:  tactics, strategy, best use of resources, etc.  I feel strongly that archers should be restricted to leather armor, at best, no shields. Intelligent use of them requires a combined arms approach.  Different types of units designed/trained to fight in different ways.  This opens a whole area of tactical decisions. Interesting choices (as Sid Meier relentlessly chants..).

BTW, the game needs to add: A 'charge' effect (attack) for massed mounted troops.  And pole weapons for foot soldiers who are designed to face off with mounted troops.  And, perhaps, caster specific weapons, like staves.

Magic casters typically need a hand free to cast.  So, any outfit that takes both hands stops casting: two handed weapon, or one handed weapon with shield.  Regarding the dagger comment, Gandalf used a full (one handed) sword, along with his staff, at the bridge in Kaza dum(spelling?).  Also, for casters, deduct armor rating from damage done by cast. Interesting decisions, tradeoffs.  

Finally, comment about armor on units that typically (traditionally?) don't have heavy armor. Have heavier armors deduct from movement points (big map) and Action points (tactical display).  Remember, in medieval Europe, a fully armored knight could NOT get up from the ground when he fell, unless he had help from someone else (A squire, etc.) who was not decked out in full armor.  Hence the use of mounts.  Scout (sans armor) on mount, fast, enduring.  Knight on mount slows horse, and exhausts them quickly. 

More trade offs....

We can all see what the absence of choice did to the current tactical battles.  Say no more. =P

I have been musing about this and that...

With the current system, movement reductions from armor would hardly phase archers.  It has to be something tangible.
Armor should reduce the accuracy of archers so you could have armored close range fire support which wouldn't hit all that much at range.
And at short range they'd be increasingly vulnerable to melee attacks so the armor wouldn't be completely overpowered.

For casters, the amount of (metal?) armor they wear should reduce the spell levels they get access to.
That's a simple mechanism to tell the battlemages / adepts who cast the odd fireball from the wizards who throw tactical nukes and summon greater demons...

That limitation should only affect tactical magic. For strategic spells it's assumed that the caster takes off the armor for that.
 

Urban myth.  Medieval knights were pretty good at warfare and they didn't make dumb mistakes like that. =P
That was only true with some excessively heavy tournament armor, where mobility was considered less important than the noble heir not losing any limbs...

That is something that can (and has to be) changed.
For instance, champions could start with an average 30 DEX and thus get triple the AC from regular armor.  They are just that good. Champion, y'know?

Prices also need to come down a lot. Either that or allow the production of items from raw materials so you'd pay for the sword in the metal and materials and only a little gold.
The item prices are moddable, though.  Just type in a different munber if you don't like them. *shrug*

How about just making full plate expensive, so it's not a good idea to dress scouts or archers in it ? They're not for taking damage.

If they increase the movement and speed penalty of the heavier armors  and introduce initiative based on speed, then heavy armors start having a greater drawback. Big problem right now is that all the heavy armors have the exact same penalty for speed.  And you get master heavy armor and master armor at the same time.  It's just a difference in cost, but should be more than that.  Each armor should provide a fairly equal cost/reward benefit.  And I think Scale and Chain shouldn't have speed penalties, they should be the evolution of light armors.  Also, all races should have access to Scale armor, not sure why some dont.

Those ideas are just too complicated.  We need to balance realism, simplicity, and fun factor.  One, I still stand by that soldiers should not gain experience, and should just be stuck at the level they were trained at, as they should be expendable and not so greatly out do champions.  Two, I believe in diminishing returns of stack attack and def skills.  Or at the very minimum, the def skill.  Meaning that if the first unit has a 10 DEF, every unit after that doesn't add an additional 10, it would add 5 or what ever number we come to a balance agreement to.  Third, armor should have more advancing speed and movement penalties, the lowest level of metal armor has the same penalties as the highest level.  This should change. 

With these changes, and the changes to the attack damage and hitting, along with the implimentation of speed based initiative, would make armor choices more interesting than just the obvious get the heaviest possible.  That's my two cents.

There is so many problems with the tactical combat system, it's just not funny. Basically, there's no difference in the way combat works across different type weapons: you hit or you miss, doesn't matter if it's a spell, sword, piercing weapon like a spear, projectile weapon like an arrow, catapult, etc .. they're all just basically equivalent except for attack rating & range.

I could fill 10 pages on this topic, many have been covered in other posts already. I'll just add one: squads with shields should be able to advance with maximal projectile defense (i.e. as in greek phalanyx or roman legion' turtle) from the front. It just doesn't happen in this game, everything is the same except for attack strength and range. There's just no diversity at all on the tactical scale. You might as well just have 4 weapons in this game, all of them are just variations of these: 1) individual target spell 2) area target spell 3) mace 4) arrow, there's no need for spears, swords, heavy maces, short bows, etc

I disagree with the experience comment, both heroes & other units should have the ability to ramp as to veteran status.

i think i see what the op is getting at.

i really wish that there was some incentive for channelers not to take armour, but at the moment there really isn't. the best way to do this without ticking people off, would be to simply add some magical robes that improved casting power (INT bonus?) but could not be work with armour.

as for the archers, if people choose to make their archers more flexible by giving them armour then let them, but those of us who want to save the pennies and are capable of planning ahead will not want to giver archers heavy armour anyway.

Throughout history there are examples of heavily armored units with archer capability. The only reason most archers in history are not heavily armored is because of the efficiencies of specialization - expense being the main reason, ease of movement would be another reason also but  certainly not insurmountable not by a long shot!

There would be a big difference between forces raised for the open field and garrison forces as well.

The thing to remember is that plate armour, like everything else in warfare, has evolved over time. One of the finest achievements was so-called Maximilian Armour. Good protection, and surprisingly flexible. But it was still expensive. In World War, smaller breastplates were good protection against pistol and submachinegun rounds, but they remained too expensive for mass production.