Weapon Blocking works just fine -- in fact, you can block better with a weapon at a high skill than you can with an iron shield.
100 Block skill:Daedric Shield - 63% damage resist
Any weapon (they are all the same) - 60%
Iron Shield - 56%
The Shield Wall perks all act like +10 Fortify Blocking enchants, i.e., with a rank of 3 in Shield Wall, you will block with a 2H hammer for 78% damage resist at skill 100. The descriptions for the perk are incorrect in-game. Note that the cap for active blocking is 85%, which stacks with AR, and you can easily hit the cap with a potent fortify block enchant or a couple of perks and a high skill level. If you have your AR capped (80%) and your blocking capped (85%), then you will only take 3% of the damage you would with no equipment -- a 100 damage attack does 3 damage instead.
Also, bashing with weapons does a bunch more damage than bashing with shields. The better material weapon and block skill you have, the more damage you will bash for. If you have a daedric warhammer, a 100 skill, and the deadly bash perk, a bash will do 102 damage per smack!

-Loth
Half an hour of searching and reading through this thread to find out the answer to my question - regarding damage reduction being 85% max TOTAL or 85% on armor coupled with 85% on block to end up with approx 3%. I do plan on reaching the armor cap and didn't want my block to be a bunch of wasted perks.
Thank you, I will not trash my character now.
So as to provide something useful instead of just a thank you -
I found this mod on the Nexus which fixes the bug on Deflect arrows - namely that having deflect arrows gives you 85% damage reduction to all physical damage rather than 100% DR to arrows that hit the shield. The only drawback to this particular mod is that it no longer checks against whether or not the arrow actually hit the shield - it just blocks 100% of arrow damage when blocking. It could be slightly OP, but it's not mroe OP than the current situation, which just breaks blocking entirely. You could also probably load up the CK and adjust the 100% damage vaue to 85% or 90% if you were feeling ambitious.
http://skyrim.nexusmods.com/downloads/file.php?id=7740