I have long had mixed feelings about armor in the Star Wars setting—mainly because we really never see the main characters of the movies ever use it (except as a disguise). A lot of people (upon seeing the movies) question whether or not armor is even worth it—I mean, just look at all the stormtroopers who get taken out, despite their armor.
But when you look at it from a game point of view, armor does have its benefits. I have had several players complain that armor is too 'wimpy' in Star Wars D6, but an extra 1D to your strength could very well be the difference between a glancing blow or a severe injury. In this way, it is very much reminiscent of 'real world' armor. It doesn't make you invincible, it just gives you less of a chance of being injured (that's why they're called bullet-resistant vests, not bullet-'proof').
What you have to remember about D6 armor is that it makes sense in the abstract nature of the combat system. When you take damage, you don't roll a hit location (at least, I never used that). You simply compare the Strength Roll of the character (plus armor) to the Damage roll of the weapon. If the character takes a lot of damage, you can assume that the shot hit a more lightly armored or more 'vital' area. If the character is only stunned, you can assume the armor did its job and sloughed off the damage.
So yes, armor is functional in the game, and its even pretty well balanced (I never allowed any body-armor over 2D in my campaign, to avoid the 'walking tank' syndrome). But it still just feels 'wrong' in a lot of situations. It doesn't always feel very 'Starwarsy'. Thankfully, my players have always been pretty good about roleplaying armor 'properly'. Their characters don't wear it all the time, only when its appropriate. If they're going undercover or doing low-key investigations? Well, body-armor is kind of conspicuous. Likewise, it is usually frowned upon in most social functions. Where I don't have a problem with characters suiting up is when they know they are going into a combat situation. Then? It only makes sense to armor-up.
It is somewhat gratifying to see this theory backed up in the recent Clone Wars CGI series. I know some players feel that armor is 'beneath' Jedi to wear—but in the thick of a full-blown war, I think it would be stupid not to. Hence, we have Kenobi and Anakin both suiting up. It looks cool and it feels 'right' considering the setting.
The place where I have (so far) drawn the line is power armor. While I like this in a peripheral use (i.e. you have Zero-Gee stormtroopers and the like), I couldn't imagine running a campaign where all the characters were walking tanks (probably why I never played Rifts...)
In any case, bottom line for me is: Armor is cool, when used appropriately—and when it is viewed in the framework of game mechanics. No, it isn't entirely realistic, but it is 'realistic enough' for cinematic roleplay.