the following is without prejudice (I am prejudiced towards keeping the system mostly as it is, but I will take a step back and try to comment to my best ability):
Change D20 to 2D10
- (1) Where is the penetrating advantage? I can see that it has its advantages with respect to thus enabling you to use the two dice to do other things than just a straight to-hit roll by basically giving the dice multiple functions. But the same could be achieved by rolling the D20 (to-hit) and e.g. an additional D10 for hit location if you want to disassociate hit locations from the D20 roll. That said, modifiers on the to-hit IMO achieve the same result.
(2) When does a critical hit/fail occur (what did I overlook)?
Skill System
I understand the basic advantage to change the D20 (to-hit, high roll) / D100 (skill check, low roll) dualism to a more uniform 2D10. However, what you do is essentially the same as the D20 unification effort. That is not a bad thing, but is that needed in Palladium? If you have to unify, why not keep D20 and D100 but make it so that e.g. high rolls win in both cases [high is good is more intuitive than high here, low there]? Or, why not use a D20 for to-hit and for skills (I think the 2D10 effort may be more rooted in the effort not to seem too D20-ish)?
Number of Skills
I share your opinion that some skills may be superfluous, but after the recent discussions on this forum on what should be revised I have re-read all the skills and now think the real number of skills that are completely superfluous and should be wrapped up into other skills is really comparably low. Can you make examples for which skills you would strike and into which other skill(s) you would collapse them?
That said, I think that some "superfluous" skills may only be superfluous to one gamer, but the next one will not want to live without them. There was a huge discussion on some actually wanting more skills. It is all a question of compromise and in the end the detail level one wants.
All this is not saying that your approach is "wrong", it is not. Simplifying skills for example is as such a good idea.
You would have to revise all OCCs etc to fit your new skill system and 2D10 matrix. That is a lot of work. As with any houserule I make I ask myself this: is the new rule (or rule amendment) a fun and worthy counterweight to what you stand to achieve by the changes you advocate?
Cheers
Hendrik