I really like Propriety as a mechanic, it fits the tone well, I also really enjoy the Ability Damage Die doing damage to relevant stats (government documents, hah!).
How/what exactly does Ability Armour do? Is it provided by items? So like a properly filled out passport prevents Propriety damage? If so that could make a fun micro-game with in the large game of collecting/doing the relevant things to get armour (kind of like collecting oddities).
It may be a neat/good idea to tie Arcanum into Ability Armour and Damage, with particular items providing one or both. So like, the Pen of Immortal Bureaucracy can do propriety damage and defend you against it.
Reincarnation looks like it could create an interesting dynamic. Would it work analogous to traditional replacement characters but carrying over karma and such? Karma should defiantly affect how you reincarnated (perhaps affecting nature score?) though I would assume you already have that in mind.
This system looks like it has a lot of potential. Can't wait to see the end result!