I was talking this over with one of my gaming buddies (who is the other GM in our group, and a LONG TIME RuneQuester; while I started with RQ3, he started with RQ1), and we're going to give the Armor skill a shot.
For the purposes of initial purchase and improvement it will be like any other skill, however, it will not be rolled. Whatever skill level your character possesses in the Armor will simply offset the skill penalty assessed by the armor worn.
This creates an interesting tradeoff; should you put a bunch of points into the Armor skill so you can wear armor without penalty, or should you put those points into other skills? Should you put only 20 points into it to cover heavy leather and improve the skill later should you get a suit of plate, knowing that there will be a time you'll get penalized for not having a high enough Armor skill?
We discussed other uses for it... is your enemy making a precise shot to avoid armor? Instead of dodging or parrying, use your Armor skill to offset the precise shot in some way (haven't fully fleshed that out, yet).
But we think it's going to be a cool addition. I'll be using it next Thursday and he'll be using it tonight so I'll let you know (although he's brought forth all his RQ house rules, so tonight's game won't be a decent and complete test; for instance, in his MRQ armor is rated in a number of dice you roll with the total indicating damage blocked instead of a fixed number.)