I don't really see the current setup (where, with a Repair skill of 1, you can fix an item at 40/50 durability, but not 30/50 durability (without a Repair skill of 2)) as being unrealistic. I would expect a novice to sometimes run into something he can't fix. "That's too badly damaged and beyond my skill. I can't fix that; I'd probably do more harm than good. We need a professional.".
Or, are you talking about something else?
No, that's what I mean. It seems very strange to me that one extra nick in a dagger will cause the player to throw up his hands and say "well, I can't do anything with this anymore," when he could repair it easily just before. There's also the major "annoyance" factor that Hassat Hunter mentioned: "I'm not really that fond of the idea of having to repair constantly to prevent being able to repair at all, unless you spend 3+ points." So I guess that's why I'd prefer a system where even if you let your equipment go for a bit (also think: long battles!), at a given level of the repair ability, you can still always do something with it.
EDIT: So even though the lists Stabbey posted may make that system look complicated, that's only to demonstrate the underlying mechanics. In fact, under that system, all a player would need to understand is that the better he/she is at repair, the more total durability his/her repaired equipment will regain whenever it's repaired - there's no need to memorize the list. This would also avoid the micro-management built into the other system ("I'd better repair this before it drops below 31 durability!") mentioned above. That said, I would recommend not being able to do anything with higher tier equipment until you reach a higher ability level - otherwise, you'd be able to do a lot with just one point in the ability, assuming you didn't mind repairing things after almost every use.
But as for your points further above, I didn't realize Crafting could enhance a particular piece of equipment beyond its standard quality, without transforming it into a "new" piece of equipment - or can it?