3 AC reduces 1% damage as said.
Buffs apply after AC reduction. For example SFD which reduces roughly around 40%:
If you have 0 AC and the enemy attacks you for 10000 physical damage, you will receive only 6000 of it with SFD on.
If you have 120 AC ( 40% ) and no SFD, you will receive 6000 physical damage as well.
If you have 120 AC and SFD on, you will receive 6000 x (100%-40%) = 3600 damage.
So with 210 AC and SFD, 10000 damage will be reduced to a mere 1800 damage.
About Enchant Weapon/Power of Pray for physical attacks and Increase Magic for wizards:
These buffs only increase off WHITE DAMAGE ( weapons, mantle of dragon, celestine etc ) and NOT blue damage ( Force Rares, Magic Vigor Rares ).
For example lets say you have a weapon that gives you 100 white attack power ( like weapons and capes normally do ) and you hit 100, with Enchant Weapon ( which is around +50% ), you will hit 150.
Now lets say you somehow have a weapon that gives you 100 blue attack ( like force rares do ) and you hit 100 without any buff. With Enchant Weapon you will still hit only 100.
It's the exact same thing for blue magic damage ( Magic Vigor Rares ).
^In short, Force rares and Magic Vigor rares do NOT benefit from Enchant Weapon/Power of Pray and Increase Magic.
Even though these buffs do not buff the blue damage of rares, AC and defense buffs still block the extra added damage from damage buffs. In short... If you have g20 force, duel with no buffs rather than Z + SFD, because you will deal more damage. :d
Test all of this out for yourself in game, that will give you the best idea.
About weapons and tactics... I have no clue. I guess it's easiest to test it at 100 TT by equipping weapons with different damage bonuses and then doing that at 200TT as well.