Overview

OK, here's an overview of how I see salvage working.

Every kill leaves salvage. The quality of the salvage is dependent on the type of kill -- for example, blowing a head off tendsd to leave the rest more or less unharmed, etc. Salvage does not count against player's who lose in PVP, although they will certainly have to perform repairs.

The player losing pays for repairs. These are scaled/prorated based on the costs/materials crafting the item, on a logrithmic scale (that is, past 50%, repair costs don't go up as fast as up to 50%). The player winning obtains salvage, in form of the materials originally used to craft the salvaged items, prorated based on damage on the same logarithmic scale. To actually turn that material back into an item, they would have to spend money. This keeps PVP from becoming an easy source of infinite resources, while still providing useful salvage.

We can play with/tweak this some later on.