I did some (fairly extensive) testing on this yesterday. Mes results:
JUST giving the unit a default, init-field "this setdamage -10" (for instance) does not, as Cheetah observes, make them particularly invincible. They will perhaps survive one more shot or so, but as we all know, when the AI shoots, they shoot to kill. A lot. In AI vs AI engangements, this base minus-value to damage did not seem to have much of a difference.
Conclusion: the engine only accepts one "negative value" hit before resetting to its default 0-1 range. (needs further testing)
However, if used in conjunction with the "hit" eventhandler (resetting the damage to a negative one every hit) will produce much more interesting results. Here are my (preliminary) results:
this setdamage -10; this addeventhandler ("hit", {this setdamage -10}]
-> The unit is invulnerable to small arms fire. All of it. Shooting the unit in the head with a SAW for a full clip will yield no results. HOWEVER, the moment the "pain threshold" is overcome (i.e., one shot, one kill) the unit immediately dies. I believe that at -10, the unit could still be killed from headshots from a .50 cal.
this setdamage -5; this addeventhandler ("hit", {this setdamage -5}]
-> Unit still invulnerable to small arms fire, but dies from anything of higher caliber (i.e. .50 cal, explosions). I think they might also buckle under multiple close-range headshots from a 7.62-type weapon ^^
this setdamage -3; this addeventhandler ("hit", {this setdamage -3}]
-> Unit dies from headshots/high calibre shots.
Conclusion: I didn't try it up to really ridiculous lenghts, but even a -100 unit would still die from i.e. a tank shell (lots of damage in one of those, though). Basically though, it's possible with this method to make units invulnerable. This also works on vehicles, BUT! The crew generally dies from the concussive effects nonetheless.
Caveat: When applied on many units (squad-sized), the eventhandlers seemed to get a bit overworked and didn't want to work any more. Basically there's a lot of ArmA-randomness going down here, that needs more research.
But, to conclude: if someone made a quick .sqf script that checked for body parts hit (i.e., head-arms-legs) and then either negated the damage or let the unit die, there's a sort-of chance to make SOME kind of body armor out of it.
Wolfrug out.