Mages are garbage in this game. I do not think this is necessarily an issue with the dual armor system but rather encounter/enemy/skill design.
1. Magical damage is for the most part AOE damage. However, the game hugely favours single target damage due to the round robin Initiative system and encounter design. Unless you know the encounter beforehand and go through the trouble of setting up, the starting position is that your party is clumped together and gets AOE'd down while the enemies are all seated in four different corners.
2. Leaving aside the fact that enemies spawn in different locations, targeting a particular enemy down is really hard. Your best single target spells are usually also your best AOE spells. A Fireball on four enemies can be awesome, but a Fireball on a single enemy is usually underwhelming. So, for example, let's say that a physical damage party of 4 against an enemy party of 4 kills one enemy per turn. Meanwhile, the magic damage party will kill all four enemies on turn 4 but will suffer heavy losses while doing so.
3. Magic AOE deals damage to friendlies while physical AOE does not. Fireball deals damage to your party but Whirlwind does not.
4. Mages have severely reduced mobility by contrast to physical damage dealers. Physical damage skill trees have a ton of mobility skills, e.g. Phoenix Strike, Cloak & Dagger, Backlash, Blitz Attack, Battering Ram, Tactical Retreat, etc. Mages do not have these. So the usual outcome is that the enemies teleport on top of the mages and the only option for the mages is to AOE themselves down while boosting magic armour (whereas for a melee character having enemies teleport on top of him is a blessing). This ties in with #3 - by damaging enemies you are damaging yourself and your party. As if this was not bad enough, almost every melee enemy in the game has Attack of Opportunity, meaning that there is really no point in trying to reposition as you will be taking extra damage.
5. Magical armour tends to be a lot higher than physical armour. You are facing reduced single target potential with increased magical armour.
6. Resistances. Physical there be none. Every other enemy in the game has some kind of a magical resist. Most importantly bosses. You take an encounter that is meant to be challenging and then add another layer of difficulty to it by ensuring that you only deal 30% of your damage to the enemies. The way that the game works is that you tend to specialise in 2 skill schools - let's say Pyromancy and Geomancy. But then you present an enemy that either has ridiculously high resistances to both schools or make you heal him outright. This makes your party member an outright liability in a fight, or at best a meat shield.
7. Cooldowns. Ties in with 6. Your elemental nuke deals as much damage as an autoattack by a physical DPS. Except that you cannot use it for another 3 turns while they use theirs 3 times per turn. So your mage is sitting with their pants down for all of these rounds - hopefully not attacking lest the damage type from one of the wands / staff heal the enemy.
Most importantly - how to fix this?
1. Meld physical and magical armour into one. No CC until you blow through the armour but there is only one type to get through. Make the armour threshold high and HP threshold lower.
2. Remove Attack of Opportunity from most enemies. This is crushing for casters but irrelevant for melee/rangers because of their movement abilities.
3. Remove resistances. The concept that certain characters/builds should be outright locked out/be detrimental in a fight because of their build type is silly. Find another use for runes.
4. Nerf physical. Nerfing is never a pleasant process, but this damage type is far too strong. Killing the final boss in one round is unlikely to be desirable.
