Who else remembers when you could go over 100% armor with Ion and gain shields when shot? Because that's essentially what this armor block would do.
a 255, 99% armor block would have somewhere along the lines of 25,000 EHP. Seeing as this block would probably be expensive to produce, it would mainly be viable for only smaller ships, which would make them near-impossible to kill with another small ship.
Overall, this sounds like a bad and obnoxious idea. People shouldn't be able to coat their ship in what amounts to faction modules.