Well, we actually created a whole set of new martial arts skills that higher skilled folks could learn (basically, you had to have a combat skill with 100% attack and parry). Within that system, we introduced things like riposting, splitting skills unevenly if you wanted, better aiming, fumble avoidance, removing impales, increasing average damage (used the old truesword method for this), etc...
Those were add ons though. We specifically left them out of the basic combat system so that they didn't impact lower level combats. The idea is that below 100% skill, you're basically just doing straight attacks and parries/dodges. Nothing special. What you roll is what you get.
Oh. We also modded the crit system a bit. Instead of no armor at all, a crit reduces all ap by half (including parry). We found that worked better at balancing out the use of parry versus dodge (for more or less the reasons I've discussed earlier). We also put specific limits on armoring enchantment. In addition to limiting total enchantment to double original APs, we restricted the parrying benefit for armoring shields and weapons. Basically, you can armor enchant a weapon, but you get no extra parrying effect for it. The weapon is just harder to break. Shields can gain up to half again their base AP for purposes of parrying when enchanted. Armor can gain the full x2 APs.
The objective in our game was to make each method of defense useful and viable by itself, but with varying benefits. These adjustments worked pretty darn well. Dodging is effective due to the combination of level subtraction and increased ability to potentially armor locations over parrying items. Parrying with a shield is effective due to simply being able to add more to the total APs (since crits only halve, you're much less likely to take damage from a crit from a lesser foe). Parrying with a weapon is least effective at preventing damage, but with our martial arts system allows for ripostes (which by themselves are pretty darn powerful effects).
We also use a combat system that allows a character to subtract their natural skill over 100% from an opposing skill. So a significantly better skilled warrior can often make an opponent miss (at at the least drastically reduce the chance of being specialed or criticalled). There's a few other minor house rules we use as well.
Obviously, those are pretty significant mods to the base game system. But we've tweaked them over the last 20 years or so and have them pretty much perfect at this point (for our game anyway). We have powerful characters that use any of the three defensive methods. All of them are quite effective. At the lower end, obviously shield parry is pretty dominant, if for no other reason then a higher starting chance and more total APs. However, any method can and does work and all of them become more effective as a character gains skill.
I've always found this particular topic to be fascinating, simply because there are so many different ways to approach these skills and so many different seemingly minor rules that can significantly affect how the abilities work and therefore how balanced they are. There's no specifically right way to do this. However, I do think it's important within a game mechanic context to try to make sure that the choices offered to the characters in terms of development have a somewhat equivalent pro-con balance. If everyone in your game uses shields because that's always a better way to go, it might be a good time to look at why that is and maybe make some adjustments. Same thing with dodge. At one point in our game, dodge was actually too overpowered (trust me. It's possible!). Whatever works and makes your players happy is good though...
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