In Fallout, it was not really worth setting your strength above 5 or 6, unless you were a melee/Hth character. If you had NPCs, you didn't have to carry many items, you could use drugs to temporarily raise them and when you got PA, it didn't really matter anymore.
Uh, hell no. You would need a 7 to operate the minigun. Which so happens to be the most lethal weapon in Fallout1. Even with only one rank of Bonus Ranged Damage I could kill a super mutant (one wearing the black kevlar armor) in a single burst... could penetrate the armor on brotherhood soldiers, and could kill deathclaws pretty damn quick. With two ranks of BRD I killed the master in 4 bursts (~150 damage apiece mostly), and everything else simply got the shit knocked out of it (except the lieutenant). On top of that, 5mm ammo was abundant as hell - AP or JHP.
But I wouldn't get a strength greater than 7 though... since you didn't need an 8 or above to get any perks and the power armor did raise you up to 10.
As for melee characters - critical rating is more important than strength - and you could easily make up for a lack of strength with the Heavy Handed trait (hell, that's like a +5 strength right there as far as damage is concerned).
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I dont think that armor would protect you from being hit par se'... in fact, it makes you easier to hit - think of it, you become a larger target that doesn't move as fast (and I consider your clothes and armor to be part of you when you get attacked). If you get hit with an electric weapon, it doesn't matter if it only grazed your armor - it'll go through that and hit you... get grazed by a bullet and you'll still feel it, etc.
They should replace the AC bonuses of armor with AC penalties and increase the amount of Damage Threshold that armor provides (as well as lowering Damage Resistances slightly). That way, wearing armor makes you easier to hit, but allows you to take it easier... which makes the whole concept of wearing armor abit of a judgement call.
Power armor should increase your action points and strength, but reduce your agility (it makes you faster and stronger, but not as dexterous). Power armor is also a VERY high tech item - something which should only be attainable later in the game (and with a perilous quest... go down to the bottom of that collapsed, irradiated military bunker swarming with mutated creatures and robots... sounds alot like the glow to me).
The only armor I think that should
increase your armor class are very light, maneuverable garments (like a karate gi or something made of silk). Could manufacture some of these with moderate protection values with advanced cloths (like "silksteel" or a kevlar-woven jacket).
Higher armor class means that there's a better chance that they'll hit air instead of you (or your armor).