yeah, damage reduction (reduces damage by 200) stacks with deminishing returns, but not with itself. the question is, does say, 90% reduced damage (from armor) stack with 65% reduced damage of defend?
late game, fighting rag, there is a noticable difference between having defend on and off, but that doesnt help answer anything as far as math craft goes.
end game, an extra 5-8% damage reduction is a lot though, every 1% is a lot once you beak 90% and have an item evasion. 5% of 1000 damage is still 50 damage reduced per hit. very late game, most players have 3000 damage, and attack 2 times per second. every second of fighting, you are saving yourself 300 HP with an extra 5% damage reduction. in a duel that lasts 1 minute, that is 18000 HP. (some mathcraft for you)