No, it's an extra effect on top of the normal defense. As far as I know, last-pip protection is a mysterious mechanic separate from defenses; don't know if it was ever reverse-engineered. I believe difficulties also reduce knights' natural defenses before any modifiers or enemy stat changes, but I don't know the specifics off the top of my head; that information is either buried in some old Arsenal thread or lost to time. I only remember the basics of the game's damage formula, where the game favors extreme defense and minor defense boosts tend not to matter in isolation as you're experiencing.

(Tangentially, this is why attacks that break your shield after being mostly absorbed do peanuts to your healthbar, and split-damage weapons like Brandish outdamaging monotype weapons against neutral targets with high damage bonuses or performing worse than typical when poisoned is due to their damage types going through defenses separately, crushing them twice or being crushed twice.)

I have some foggy memory of seeing impressive performance in T3 arenas from players with two Notes, correct defenses with stacked UVs, and temporary defense buffs. It's a massive amount of preparation for questionable returns on the best of days, but it is a neat approach to combat and I wish it wasn't tied to a triple digit hour grind since only a tiny amount of players will ever be able to experience it for themselves.