Hey folks.

I was thinking of changing many armor items in the game so that they function differently and overhaul combat.

Instead of merely having the highest armor value possible and just increasing health, magicka or stamina every level each armor item would now have enchants, these enchants would increase maximum health, magicka and/or stamina dependng on the type of armor. The catch is that health, magicka, and stamina only increases by 5 per level so that gameplay remains balanced and challenging. Here are my armor enchant ideas generally speaking:

Light armor (leather and elven etc): Moderately increases health, has no movement speed reduction and no stamina reduction. Has a moderate armor rating.
Heavy armor (steel and daedric etc): Greatly increases health, most heavy armor reduces movement speed and stamina. Has a high armor rating.
Cloth (robes): Greatly Increases magicka, some cloth armor increases health slightly. Has a low armor rating.

This would mean you would have to equip the armor best suited for the situation.

I am also working on a reputation system (kiling these NPC's makes this faction angry with you etc) so if anyone can give me the run down on what the manjor factions are (I am not that familiar with TES lore) in Skyrim it would be appreciated.

While differentiating armor types more is good, I'm not sure about using health as a variable... and I think Athyra had the right of it when he went with increasing the strength of enchantments on cloth armor.

Also not sure about 'equip the armor best suited' - the trope at play is more often, "Golf Club/Christmas Tree Fighter", who carries a lot of weapons at his or her disposal to use as the situation warrants. Changing armor constantly seems like it'd be more of a hassle than a fun element because you'd have to switch out so many things at once.