Hey, everyone.
I have been playing around and learning how overheat works and frankly, I don't think "constant yet subtle armor damage" is the way to go, considering lore and its current affects on gameplay mechanics.
We currently have a red throb in the cockpit (god that sounds dirty) when overheating, which gave me an idea.
Suppose that you have a separate gauge for "critical heat". This "critical heat" gauge could appear under your crosshair as an MW2-style heat bar that closes into the middle (as an easier frame of reference for people pushing the limits). When you are over that overheat line, you begin to fill this "critical heat" gauge at a rate of (current amount of overheat / xsecond, where x is whatever scaling you would think is fair); when you are below the overheat line, critical heat dissapates at (current amount under overheat line / ysecond, where y is whatever scaling you would think is fair).
Here's where it makes a difference: the critical heat line has ticks along it, measuring certain "milestones" - ammo explosions and weapon meltdowns. Bigger weapons will meltdown/have their ammo explode at higher temperatures (and therefore they would add ticks closer to the center of the gauge), and if the two critical heat bars reach the middle, you get a core meltdown (read: dedmech). Oh, and different-sized ammo explosions/meltdowns will do different amounts of damage to your 'Mech- of course, nobody wants to get struck down by an MG cache cooking off, and the smaller the weapon, the less cookoff/meltdown damage you would take, and you could even get creative - say, lasers meltdown without any indication or damage to your 'Mech, then break the next time you fire (melted focus crystal); Gauss watermelons don't explode, but the guns do; missiles are downright catastrophic and have the same "loose rockets everywhere" effect they currently have; etc.
Of course, some playtesting will be necessary so people with PPCs don't just shoot at 'Mechs that just fired their laser salvos and near-immediately cause three weapons to meltdown (though perhaps this would make coolant even more important in-game...?), but I still think this is better than "your armour somehow whittles down".
EDIT - Damnit, this should be moved to Suggestions.
PS - Credit goes to someone on the Mektek forums for thinking of this while discussing MW5.