"Repair hammers that wear out," was used in TES: Morrowind and Oblivion and was generally regarded as awful. People were hauling a hardware store's worth of hammers around to be able to put their gear back together after every fight, and has already been pointed out, it's not even doing anything meaningful or interesting, just adding more tedious micromanagement.
Repair is in an awkward place because it's sitting there alongside Crafting - so apparently I may be able to make a perfectly sharp sword from scratch, but once it gets dull my only solution is to make a new one because I'm incapable of sharpening it... uh huh - and the setting doesn't really feature enough mechanical/technological stuff to reasonably merge Repair with Lockpicking as a "Tinker" type skill.
The only possible way that I can see Repair being salvageable as a skill would be to shift the emphasis to world interactions, but that would still favor a merged "Tinkering" skill because unlike something like Fallout 1 and 2, there just isn't enough technological stuff for it to stand on its own. I suppose one option might be to have "broken" items pop up here and there that can be put back together with Repair, but even that isn't a great option because it either ends up as another "save some cash" skill (because you don't need to pay an NPC to do it) or ends up being essentially mandatory for the sake of gearing.
In the end I think that dropping the skill and removing item durability/decay is probably the best (and simplest) solution. It's never been an engaging mechanic or added anything beyond annoying 'busywork' in any in any game that's used it.
