I think the current system is not good. Too basic and really immersion breaking IMO. For example swords can't be repaired IRL by somehow adding ingots to them.
Some ideas about how I think it could be improved;
Tools and weapons now lose max damage as they wear out, it should be a non-linear rate, so that at first the loss is slow and the weapon stays near max effective rate for a while but as it wears the rate of wear increases.
To reverse the wear and tear on tools and weapons 2 new consumable craftable items should be added, the whet stone and the oil cloth. The whetstone could have 2 grades even, basic and fine. The basic whetstone is a single use consumable that can repair 1 tool or weapon from worn-out to sharp and full damage again and it is created from normal stone, though it takes 100 normal stone to craft as not every rock is suitable for making a whetstone. The fine tier of whetstone should be craft from a steel ingot and crystals and it should be capable of multiple uses, perhaps 5-10 or so. The whetstone though only partially resets the rate of wear and tear on your tool/weapon.
The oil cloth is what not only completely resets wear and tear but actually stops wear and tear for some duration, sort of like how having full water and food means it doesn't start dropping for up to 5 mins. The oil-cloth itself doesn't wear out but it does need new oil every few uses. To craft the oil cloth you need leather and oil. Oil should be created from seeds
So between these 2 new items, you can keep your tools and weapons in good shape, basic whetstones can even be created while out and about after collecting the stone.
However, any time you allow your tool or weapon to drop below 50% wear there becomes a chance for the tool/weapon to break, requiring it to be fixed on a blacksmith table to restore it to working order. The more worn and poorly maintained your gear the higher chance it'll break with each use.
I think a similar sort of thing for armour could work too, using some kind of kit containing sewing items and spare leather straps to repair the soft parts and also using the oil cloth, as you would on a weapon, for armour containing metal parts.
So the basic and light armours only need 1 item to maintain while the heavier and more advanced armours with metals use 2 items like metal tools and weapons.
For buildings I'd like a new work station, something like a maintenance stockpile, and a new thrall to work it, the builder. So you build this inside your building and put a thrall on it and as long as you keep it full of the correct type of repair supplies it will repair structures in a decent radius until it runs out of supplies. It should have a priority repair order, foundations>walls>doors .etc and also then prioritise the most damaged of each first. it should repair 1 structure at a time, at about the same rate as you could with a repair hammer.
I can foresee a system similar to this repair station system being used for base defences too, like boiling oil being poured down from the roof any time an enemy is below, or perhaps a log/stone drop station. Perhaps a manganel on the roof, to fire at attackers further away, perhaps a defence against trebuchet attacks.
Anyway this is just some ideas for a bit more deep/engaging game-play, I think this si what early access is for as well as just fixing bugs, putting forward ideas that could improve the finished game.