There used to be very few monsters that did piercing attacks (only giant lichen colonies). Wolvers, chromalisks, and most slimes did only normal attacks until an update a few weeks ago. So, before that update, elemental was much more important and piercing defense was nearly useless.

Since that update, there is far more piercing in the game and now you may actually encounter a bit more piercing (beasts and slimes) than elemental (mostly construct attacks like retrode lasers and puppy bullets). There's little or no piercing in the firestorm citadel, though, so you'll need a mix of normal, shadow, and elemental for taking on Vanaduke.

Shadow gets no love because all of the normal/shadow armors (except deadshot) also come with fire weakness. There is also no bomber nor swordfighter armor with shadow defense built in. That said, devilites and greavers are the most difficult monsters in tier 3, so you'll want a set with good shadow defense eventually.

I forgot that Fallen trades fire weakness for curse weakness. There's still a weakness, though. Compared to the array of not-weak, plus damage buff normal/elemental gear out there, the options for shadow defense are pretty unappealing. I'm going to need it anyway, though.

Fallen has a damage penalty vs fiends. Defeats the entire point of defending against them when you also can't kill them anywhere near as fast.

Terrible armor.

Lolno.

Now, now, must we resort to insults? We're all gentlemen here, including the ladies. As for your original point, the damage penalty vs fiend is irrelevant; you are doing maybe 10-20 less damage - inconsequential given the amount of Shadow Defense and Fire Resistance you obtain. We are, of course, ignoring the fact that Fiends aren't the only things that deal Shadow Damage. It hardly defeats the entire purpose of the armor and is far from terrible.

My friend.

The damage penalty for Armor of the Fallen is partially offset by the increased attack speed. Curse resistance is only useful if you are wielding a cursed weapon or get hit by a Phantom's charged attack. Fire resistance is far more useful since a lot of different monsters can inflict it.

Once wolvers start teleporting (T2 for Alphas, T3 for all of them), the fact that it's a "melee or very short range" piercing attack becomes pretty irrelevant. The wolver goes "pop" and bites you in the behind. Even freezing them in place doesn't help much (they can teleport once after being frozen). I find gun puppies and retrodes a breeze compared to teleporting wolvers. (Hint: use the cryotech alchemer line against range-attack constructs)

Devilites and greavers may be the most difficult enemies in the game for me, but I have no shadow defense in my current armor, so that's a big part of that. I'm saving up for a dread skelly charm, but grim tokens aren't exactly seeking me out, and I'm not going to start working on deadshot (or maybe Fallen) until I get my demo stuff to 5*.