It's not a bug, its the game trying to give you a hint withought being too mean. :)

Seeing a ship with 30,000DP go instantly from full green to exploding into a million bits
from a DD shell seems like, if not a glitch, very very misleading.

It's NOT a glitch. They designed it this way. That's how burning works. The blue arrow is
current health assuming nothing is repaired. The blue arrow will continue to go to the
right until it meets the green line. The ship will stop burning. The green line and blue
arrow would then continue to the red arrow unless more damage was taken. Again,
this is no glitch.

Alright, so after that BB was struck by splash damage, their DP bar looked like...
_v__________________
[|||||||||||||||||||||||||___]

So this means that because the blue arrow was waaaay over on the left side, the
'actual DP' was incredibly low, and only a few small DD hits were all it took to do away
with it?

I don't know, seems like a glitch, or at least it could be displayed properly.
I've seen a BB with fully green health die to a single shell.

blue marker tells you your actual real DP.
Once it has reached the left side of the screen your visible DP will decrease fast if you
are hit.
This is the point you will burn to, but the marker will move to the right depending on
your RepairCrew.
So, the better your SD, the more DP you will be able to recover by Repairs and the more
Damage you will be able to take before you sink!
In other words it show your real HP that is repaired at the moment.Also SD have max
absorb value and it is:
ship HP . (SD/1000) so fo example ship with 10k hp and 900SD will take 9k and then start
geting real damage from shells (this is the reason why some BB take no damage from few
hits and then are oneshoted)

This ISN'T a bug, but isn't negative SD either (or at least not the way I think of it. The
blue arrow is negative, but still 900SD). Being hit by sub torps would cause it to burn
quite a bit. The DD attacking would then be able to do much more damage because of
the burning + shell damage.

Last part, yeah right. If he is VERY low health, it is because he is burning SO much that
the current DP is technically in negative/almost 0 numbers. Since the technical health is
so close to 0, it takes very few shots to kill. That's also why AA can kill them.

And I honestly don't believe this "SD doesn't help against torps" crap. With 100 SD, I
burn much more and have less base damage than 0 SD. That's just my experience with
torps.

That's not a bug beef, the whole purpose of Soft Defense isn't to give you /more/ DP. When
all is said and done, Soft Defense allows you to gradually burn off damage, rather than
take it all at once with physical effects.

Have you ever been hit so hard that your blue arrow takes a very long time to even start
going again? That's negative SD, and it will stay that low until enough DP is burned off
to compensate.

It's not a bug, and it only happens if the SD triangle is completely at 0, and not moving
back up.

Yes it is a bug. It's also what allows for AA kills (where an AA shell which does 0
dammage sinks a ship).

You pretty much said it yourself. Since it was a BB5, you can safely assume that it
had 900 SD. The sub torps would have taken all his SD away, at which point the
shells are doing their full amount of damage, even if they do not display as such.

HEI Type I fired 6 torpedoes at the Sovietsky Soyuz, all of them detonated about 3/4s
the ships length off from the side.

Spaekreuzer D38 fired off a few very scattered 4 shell salvos, each tiny shell doing a
massive amount of damage. Only showed as 5 damage though.