Yes, something should be done to fix parry. As it stands it isn't worth the skill points. I would love to play a defensive duelist type of character but parry is crap.
Here is how parry works:
When a character enters into Parry Mode he can do nothing but stand there and wait for an attack. His mind is honed on two things: Defense and Counterattack. The benefit of Parry is largely negated against multiple opponents.
To check to see if a blow is successfully parried a check is made against the modified attack roll of the incoming blow. If successful, it means the attack does not damage the parrying character. However, a character may only parry a number of attacks per round equal to the number of attacks per round available to the character. Unfortunately, a parry can only deflect the first attack in each of the three flurries in a round (for example, parrying an opponent with five attacks per round will only attempt to block the first, third, and fifth attacks). Furthermore, counterattacks are included in the number of attacks that may be deflected (for example, a successful parry and a riposte use two of the three attacks per round limit) which further reduces the effectiveness of the skill.
Additionally, ripostes are made with the character's normal (descending) attack bonus, not at the full bonus each time. For example, if a character has an attack schedule of +7/+4 and successfully reposts two attacks, the riposte attacks will be at +7 and then +4 each time.
Finally, wearing armor greatly reduces the effectiveness of parry, meaning that it is designed to be used with lightly armored characters.
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Here are my suggested changes:
When a character enters into parry mode he is effectively entering into a deffensive state of mind. For every 5 points in parry the character gains +2 Dodge AC which stacks with Tumble AC. With the Dodge AC in effect the skill should no longer check to see if a parry is successful or not. If it bypasses the AC then it is successful, and if it does not then it is not successful.
Counterattack should remain as it functions currently, though through playtesting it may be wise to see if the DC needs to be raised or lowered.
Ideally, you aren't going to be killing people in parry mode, you are just holding them at bay. It works similar to Improved Expertise, granting the same amount of AC with 20 points in Parry (obtained through leveling up, feats, and items) and 10 in Tumble.