So far, when I make custom characters, as soon as their armour breaks, they're left in their underwear, and it looks ridiculous. Is there any way I can better control which items disappear when a character's armour is broken?
You can't choose what breaks, but there are some pieces that are in the underwear category that don't really look like underwear. For example, chain mail. I'm not sure that helps with the whole "not looking ridiculous" thing, though.
There is one way around it so far that I found out. If your character wears a particular pair of pants, they won't come off after the armor break. In some cases, the shoes that you wear stay as well. Unfortunately for both, it's pretty specific, so you never know when it might work or not.
Hope that helps.