A brief discussion of three kinds of armor systems :
A flat reduction value - I believe this is what is used in TOME. A set amount of armor reduces a set amount of damage dealt in physical damage. So 4 armor will reduce damage by 28, etc (I don't know the real values).
Resistance /% - Damage is reduced by a set %. 50% resistance reduces damage by 50% - (500 deals 250).
Scaling % - Used in dota and most mmos in some form, Each point of armor reduces damage by a scaling %. Dota uses 6%, so 2 points of armor reduces 11%, 3 points 15%, etc.)
(There are items which reduce a flat reduction but this is below the thresholds of stronger neutral enemies and all enemy heroes). The important thing to note about this is that with the concept of effective hp it scales linearly.
Effective hp:
This is easiest to explain with flat resistances. A 500 hp halfling beserker with 70% resistance to fire will require an extremely high amount of fire damage to die. (500 / .3 = 1667.67 fire damage for lethality). Now the important thing to know about balancing is that this affects just how effective healing is for that character. A single point of hp healed for a player will be worth over 3 hp of damage from their opponents in that damage type. The reason that the scaling % scales linearly is that each point actually add 6% to their effective hp, although it makes 100% reduction impossible to reach.
Cursed : What is particularly imbalanced about the cursed class is if their armor is high enough to ignore damage from enemies while letting them still drain hp off of them, in addition to having a talent which naturally gives them a 20 or so % increase in EHP at 10+ hate (cursed body). There's nothing technically wrong with this concept, in effect it just means that they are counter-summoners, something of which tome has too little. So the amount of health you can get from lifelink can mean a substantial increase compared to the amount that healing and regen would be worth to a different class. (I suspect this is why darkgod could load up a end-game cursed and not take damage at all in the end fight). The danger comes in when armor allows them to totally ignore even strong enemies and drain more hp from them than they will ever deal.
I've also seen a few people on the forums mention that stacking armor seems pretty imbalanced in ToME currently, and many classes can do it without too much effort (get about 22 strength, spend two generic points on armor, max stone skin and skeleton armor on a skeleton archmage, etc). One solution to the problem would be to merely switch armor systems without actually changing Cursed, as Cursed do currently feel like one of the most complete classes. It's just one option, though. Switching Cursed's skill to merely do double the amount of damage it currently deals rather than draining HP may be bit more thematic and make the game go slightly faster for them in compensation. I do think that balancing a system like this is considerably easier than the current system, especially with some of the random very late game pieces of armor you can find early on (Stralite or Voratun pieces can make certain things live a very long time).
It can also help to differentiate between defense and armor more - Currently, high enough armor has the same effect as defense in resulting in 0 damage(just says 0 rather than miss). It can even be better to be hit from the damage on hit auras, resulting in the strange need to have low defense but very high armor.
Also, resistances were lowered to be capped at 70% for a similar reason. There are more systems of armor than the ones I know of , these are just the simplest ones to use that I know of. Could switch it to 5% to make the math a bit simpler even.
(A source to back up the 6% increase in ehp per point of armor thing :
http://www.playdota.com/mechanics/damagearmorProof:
Consider a hero with 1000 hp and 0 armor. To kill it one needs to deal at least 1000 damage to it.
If we give the hero 10 armor, which is 37.5% damage reduction, every attack would only deal 62.5% of the original value (100% - 37.5% = 62.5%). To kill it now, one needs to deal 1600 damage (1600 * 0.625 = 1000). You could say that the hero now have 600 more effective hp (EHP).
If we instead give the hero 20 armor, which is 54.5% damage reduction. The damage multiplier is now 45.5%. The damage needed to kill would increase to 2200 (2200 * 0.455 = 1000). The increase in EHP is 1200, twice the amount as given by only 10 armor.