My only problem (if I'm understanding you correctly when you say "Increased levels of temporary durability loss require higher levels of the Repair skill") is that in your system, you could have a situation where you'd be able to repair an item (fully?) at a certain ability level when it's at 31% durability, but would no longer be able to repair it at all when it drops to 30%. If that's what you're saying, it would seem kind of weird - but correct me if I'm wrong.
The way it works right now is that (made up numbers) an item at 40/50 durability requires a Repair skill of 1 to fix. An item at 30/50 durability requires a Repair skill of 2 to fix. And so on. It's shown in the tool tip of the damaged item. I'm fine with this because it basically encourages players to keep an eye on their equipment and maintain it, discourages them from using weapons to open locked doors/containers, and penalizes them for neglecting it. I'm not changing or adding that system, just carrying it over.
Also, I would add the ability to slightly enhance the effectiveness of equipment beyond its "100%" value at Repair level 5. It would spice things up a bit, and really be an appropriate reward for players willing to invest so many ability points.
Isn't this already a function of the Crafting skill? As long as you have the appropriate skill level there, you can already enhance the stats on weapons and armor. Doesn't being able to do it with Repair skill as well seem like overkill (and steals away from the importance of the Crafting skill)?
What are your thoughts on those ideas, and Mikus's response that you'd have to make Repair Hammers either rare or expensive?
I think repair tools (hammers) need to actually be much more frequently stocked and a lot cheaper. Right now they're priced with the idea that you buy one of them and it lasts forever. What I was talking about was moving permanent durability loss to the repair tool itself, which makes it a consumable. If it's a consumable, it needs to be readily available and much cheaper, especially if players are expected to repair often or be penalized for neglecting their gear.
With the permanent durability loss on the repair tool, you can either base it on the amount of durability points restored on an object, or based on frequency of use (each use of the tool/skill deducts X points from the tools durability). I prefer the latter approach because it greatly improves the usefulness of the Repair skill (players with a higher Repair skill can use the repair tool less often, while being able to repair greater amounts of temporary durability loss - so they save money by needing less consumable repair tools by investing more points in the skill).