What exactly does muffle do? Does it make me move silently or just make it seem as if I am not wearing armor (no armor clanking sound when sneaking)? And would it be better to enchant multiple items with muffle to get the max effect?

One enchant of muffle is enough. It lets you move silently.

Does this make the muffle sneak perk useless if you are using muffled enchanted equipment?

You can only muffle your boots, and its a pain in the ass to find muffled boots you can disenchant. Can't use unique ones like nightingale and DB, to disenchant. I'm currently going with a heavy armor(daedric) build, I have the muffled perk, and the muffled enchantment on my boots. Plus the first sneak perk (just once, so 20%) and I have a sneak enchantment for 44% on my gauntlets, plus the heavy armor weighs nothing perk too (70 required) I am able to sneak up on people and get the stealth kill cams on them.

At Level 35 I finally found some Muffle boots to disenchant so I could put Muffle on my light one-pound boots. I wear robes and have the Mage Armor perk and use Stoneflesh so I can't be armored at all if it's going to work as it should. I found those Muffle boots from a Khajiit traveling merchant outside of Whiterun.

:tes;

overkill prob isn't necessary, once your sneak is over 50 and you have 3 or 4 perks for "harder to detect" you're in good shape, i do put muffle boots on my followers sometimes. i think muffle makes a lot less noisy, that coupled with a few harder to detect perks and i think you're good. so the muffle for armor perk 50% plus the muffle boots or whatever prob make you even harder to detect, but i can already be right on top of an enemy and they don't hear me, and i don't wear muffle boots, but i do wear light armor and a robe and have a high sneak, plus a 4 perks for harder to detect. so i don't bother wearing muffle boots.