I was hoping on dropping armor so that they pick it up. (you know when they say, "hey can i have this").

Do they actually equip it? If so would it be possible to make a whole town of deadric armored people?

Why..would you...?

No one has ever said this to me.

NPCs don't equip items you give them, aside from followers (and even this is limited).

They'll keep the item in their inventory until the game flushes it (and only a few will keep it indefinitely, though I couldn't list anyone outside the guards in Dragonsreach).

I keep misreading titles today. Guess what I thought of this one.

I thought he wanted to wield townsfolk. Lol

I dare ask. What did you think it said?

That.

I am trying to misread this as best as I can but I cannot come up with anything!

So far, this one gets the "Best Laugh of the Day" award.

I would like to give the townspeople armor and weapons so when a dragon come, they don't become suicidal.

Oooooooooooooooooh.

Well one day I was tired to see every one in whiterun have iron weapons when they got the skyforge and warmaidens in your town, (especially the battle borns having all iron weapons when their wealthy and powerful)
So I pickpocketed them and gave them steel weapons. After a day once they equipped the weapon I gave them I pickpocket them again and take their crappy iron weapon. I had pickpocket at a 100 but no perks in it but also did this with 25 pickpocket no perks it's just harder. I'm not sure if armor will work but you can give every villager a Deadric mace if you want.

Well you can;

But first you need to max out pick-pocketing and pickpocket everything from then. The give them Daedric Armor so that it is their only choice. Oh yeah, and you also have to go to their clothes so that they can't wear anything else.

If all else fails, then open your notepad and delete system32.dll.

I'm with the other folk, genuinely thought you wanted to strap on Alvor and Frodnar and set off to kill dragons.

That's rather vague advise. I wouldn't be so quick to delete anything. Besides, i always assume someone is playing on the Xbox, unless it gives reason to think otherwise.

EDIT : Besides, taking all their clothes from pickpocket does not force them to don other gear.

Actually, they won't equip new clothes/armor, unless forced to by scripting. Not even the prisoners you can meet and rescue on the road will wear armor you give them. I've tried it with dead thralls as well, it just doesn't work.