Firstly, I read every single post in this thread and I have to say I agree with some, and disagree with others (naturally being a flawed human being), But I'd like to take a bit from everyone, and such to make my own suggestion that I think would be pretty cool for a degradation system AND add to the benefits of having a skilled crafter around to actually work on things to make them better. My idea would require some revision of the current crafting system as it will require adding new DC's, and such but it would be quite wonderful to see in the long run once its finished.
For Degradation:
All items have a 100/100 durability (sort of like in diablo or such, or many other games), extensive travel, maybe a timer that triggers and deactivates everytime a character moves or stops moving, and for four every 30 min-full irl hour of travel durability is reduced by 1 to account for weather wear on equipment and overall travel wear
In combat, every 100 total points of damage recieved (debatable on the damage amount) reduces the durability by 1-2, maybe more, and upon receiving a critical hit 1-5 durability damage is received instantly (low amount as we all know we get crit more often than we would like here on potm), the damage total for durability damage would be nice as it would make sense for weaker creatures who do less damage to do less damage to your armor, and while powerful creatures like oozes and demons that hit you for a lot would do substantially more damage to your equipment, would define the difference between getting hit by a crypt skeleton with a rusted weapon for like 5 points as opposed to a demon with huge supernatural claws ripping into you and your armor for 30+ damage dealing likely a lot more damage to your armor than some weak skelly.
At about milestones of 50 and 25 your armor starts to show significant signs of wear and damage that incur penalties of -2 to AC and then -3, upon reaching 0 the armor is considered too damaged to be worn and is non-equippable (maybe all the straps are severed, leather is shredded in two, armor is dented to the point of being un-wearable).
As for weapons, 100/100 durability and every hit scored performs a DC check of 10 (or whatever you prefer) with no bonuses or penalties, and every time it fails the DC 1 point of durability damage is sustained, this would make sense as weapons make impacts a whole lot more than your armor receives them in most cases, and the durability check is only required upon scoring a successful hit or critical hit. Upon reaching durability of 50 a -1 damage and -1 AB penalty is recieved, and then at 25 further to -2/-2 (maybe even -3/-3 as its pretty worn and dulled at this point), and at 0 the weapon is as dull as a spoon and receives the no damage property until repaired.
However, enchanted, items no longer have to worry about durability as their strength is magical and should no longer suffer wear and tear, this would also increase the value of enchanted items beyond being the superior gear.
For Repair:
Depending on your armor and the corresponding crafter, they can use materials that were used for crafting your particular set of armor to repair the armor, maybe 1 ingot of the metal used in its making, and 1 bit of leather or such, wood, ect. to make a easy DC check to repair the armor, and I encourage that NO NPC's are made to be able to do this, as most crafting NPC's make mundane equipment and are not skilled enough to work on your beautiful exotic armor, with the exception of being able to repair non-crafted mundane equipment. This would encourage the value of finding people who have dedicated to the craft, as well as encourage PC's to pick up the trade at least mildly to be able to maintain their own equipment as many adventurers honestly would, or would at least have someone in their squad of friends who can do this for them when they need.
Repairing instantly boosts durability back up to 100/100.
This would all be done upon the proper crafting station that was used to make their particular type of armor/equipment
However for weapons, I'd suggest that for edged weapons there be made a "whetstone" item that can be used to increase durability of a weapon by 10 up to 75/100 durability as a whetstone can't fix everything, but in the hands of even the mildest experience can be used to at least somewhat maintain your weapon.
Additional For Crafters:
I definitely agree that -real- dedicated crafters should have some love in this system for their dedication, hard work, and experience in their crafting. As such I propose the following:
Upon crafting a piece of equipment initially there is a DC depending on the type of material and type of armor/equipment they are trying to make (DC depends on type of material, as materials for the more experienced will have a higher DC, and working on a suit of fullplate requires much more skill than a suit of chainmail), and with their full crafting capability can attempt to pass that check to determine whether an item is "masterwork" or not, masterwork items would receive 120/120 durability and have a minor boost to their stats depending on the item, maybe a +1 AB, or massive crit, small damage bonuses (maybe depending on the material used, like silver an extra +1d4 damage vs lycanthropes rather than just AB, or steel just receiving the next damage bonus level of their weapon, such as how longswords get 1d6 i think, its been a while idk, instead becoming 1d8, or 1d10's becoming 1d12 bonus, 1d4's becoming 1d6, ect. ect.) idk some type of minor bonus to reflect the item is indeed masterwork, and as such -only- those masterwork items can be enchanted, as it requires a weapon of master quality to enchant, making the need for a greatly skilled smith needed all the more to provide an item worthy of being enchanted, and yes I know this would result in a massive waste of materials for those trying to get masterwork to enchant- but, that is why you would want to find a person who has mastered their craft who can make the masterwork item to begin with.
As to reinforcements I don't think that is a very good idea, maybe a variety of "styles" a person can do upon crafting the item would be nice (serrated blade for wounding or massive crit for example).
This would indeed require a revision of enchanted items to take into account the masterwork bonuses so enchanting doesn't become null, but its only a small boost in power in return for greater challenge of receiving the items to begin with.
A minor suggestion to add to this, some variety in enchantments would be great to see as well! Maybe able to choose different damage types on enchantment (negative, fire, cold, positive, divine, acid, ect. ect.).
Anyways thats my two cents, not sure if my idea is desirable, but I think it would work quite well and satisfy all in the end, I think its worth pointing out that no matter what system is come up with the degradation system is going to be a hassle and annoyance no matter what, but that's realism for you, and it would be nice to see some realism in this particular fashion, even in a fantasy game.