Am I missing something?
The wording of the weapon OE penalty is a bit ambigous.
"All weapons more than 20% over-equipped will have DamageBonus, DamageMin and DamageMax reduced with 25%"
As far as I can tell this either means
1/ the weapon gets reduced by 25% of its current damage ie. goes to 75% of its current damage
or
2/ gets reduced by 25% of the amount over-equiped which would result in the weapon varying between an absolute minimum of 75% of its current damage to 100% of its current damage but more than likely 90% or more of its current damage.
Armour likewise
"All armour more than 20% over-equipped, will be reduced in protective ability by 25%."
This is hardly a major