Armor is a second health bar, so if you haven't been hit yet, you've got twice the amount of health than normal. It is supposed to make you a bullet sponge as that was why it existed in the original game (both for Single Player and Multiplayer), in fact there are even achievements in Source for using the Armor effectively.
You can pick up armor infinite number of times unless you're playing a specific mode like Man With the Golden Gun, where if you have the Golden Gun, you can only pick up armor once until you die.
While the Invulnerability System was modified in 5.0 to balance out weapons and make automatics actually useful as opposed to past releases & the original N64 game, Body Armor is a bit OP on purpose and I highly doubt it'll be changed in future releases. It's one of the things that sets GoldenEye from other FPS games in general because since you don't regenerate health over time, Armor is the only way to get "health" back and can be a real life-saver when you need it. It also makes you desperate to kill your opponent if they're running towards the Armor.
Changing it would make the game start feeling more like any other FPS game and less like GoldenEye, which was the main goal of the mod.