While I won't argue with your observations, I'm not sure they quite address my main issue. I think my big problem with TaN is it, as I noted earlier, gives drastically different benefits based on the enemy target, and it can theoretically sometimes give no help whatsoever (under the assumption that you can't damage reduce past 1 damage/hit) . It is obviously highly useful if you are fighting something with rapid fire (Arach, Commando, Captain) unless you are already hitting the armor limit, which I think may occur with just a Red Armor with captains.
For simplicity's sake, I'll assume a captain's chaingun does the standard 1d6 damage. If I understand armor correctly, that makes only two possible damage outcomes if you are hit wearing Red Armor.
1d6 = (1, 2, 3, 4, or 5) - 4 = 1
1d6 = (6) - 4 = 2
This means that only 1 out of 6 shots does level 1 TaN even do *anything* whatsoever, and any levels beyond 1 are totally wasted. A 50% reduction in damage 1/6th of the time leads to barely an 8% reduction in damage taken, against what would be argued as one of the enemies against whom TaN is most effective. The Arachnotron and Commando damage tables would similarly cause at least a modest percentage of hits where TaN is totally wasted. I know you can't plan around a Red Armor all the time, but even if you make it a blue armor you are still faced with TaN doing absolutely nothing against 50% of the shots you are hit by, in the case of the commando. Of course, this is to say nothing of those enemies where TaN is at an even greater disadvantage because of single, substantially higher damage projectiles, which in my opinion also make up the majority of the main threats throughout the game. I haven't taken the trait too frequently as of late, but I don't recall noticing much help from it at all against Barons, Viles, and Cacos.
Now, it's true that sometimes Ironman isn't particularly helpful for one level, but it's not too common that you are completely out of healing items and operating on the skin of your teeth, and many times when you are there neither of these traits is going to save you, so it's not entirely fair to say Ironman always loses in that position. Though Ironman is more of a no brainer when you have 9 large med packs of course, I think when resources are low it is often just as important to get the most out of every small/large life globe you manage to stumble upon.
After reflecting on it a bit more, I think it's a bit less underpowered than I initially thought, but I think my suggestion of having it improve armor's effect is quite workable. What this does it take the times when TaN is at its greatest disadvantage (when you have heavy armor) and therefore least useful, and give it a supplementary use that doesn't fully stack. The idea would be if you have, say, Red Armor that is trivializing your armor from TaN to some extent, that the effect of increasing your armor's durability would counteract that weakness. If you are gaining all the benefit from TaN because you are short on armor, the armor durability effect will be of less use to you. I don't think this would add too much total benefit to TaN while keeping it a more level choice across the board.