So stats and caps
Toughness does not have any sort of diminishing returns. It adds with armor, and is inversely proportional to direct damage received. You can consult the official wiki and see it. Doesn’t do anything about condition damage.
Hopefully while messing around with your gear, you came to realize that almost all your stats are not from gear. An entire exotic set of armor is approx half of what you get from traits, and your character starts with 916 in all the stats for free (so it takes 92 more of a stat to get just a 10% improvement over naked.
So really it all comes down to your build and how you want to play. The biggest influence of traits is how they synergize with your abilities and playstyle.
To me, a balanced approach of gear works out pretty well. If you look at fights you lose, it’s never because you didn’t do enough damage — there’s no war of attrition here the way there is in other pve games that are resource-limited (like running out of mana) or have enrage-timers on encounters. If you fail, it’s because you took too much damage, couldn’t remove conditions, couldn’t manage the fight, something like that. So, come in defensive and you’ll win.
On the other hand, there’s playstyle to consider, and build. My guardian is fairly defensive and support-ish. But when he gets a critical he gives area-effect Might, and giving boons to others procs a heal. So I want him to have decent crit rate (around 50% with consumables).
Piecemeal definitely works with respect to gear, and in the grand scheme of things, gear doesn’t matter all that much. But gear is a place where you can fill in weak spots that are left over from your profession and build. If you don’t have good condition-removal, you darn well better have high vitality, for example.
The official wiki says very little about armour and toughness except on the armour discussion where it says it has to have diminishing returns otherwise you could end up 100% mitigation.
The last stuff I read on it was very mathsy and I didn’t really get it but the laymans terms said that armour and damage mitigation had to be multiplicative and not additive.
http://www.guildwars2guru.com/topic/60838-math-damage-reduction-toughness-and-vitality/
http://www.guildwars2guru.com/topic/59433-after-lots-of-math-and-research-toughness-vs-vitality/
Plus another thread I made in the Guardian forums pointed out that Vitality is simply much better than Toughness, especially for low health classes.