Yeah I mean to me this seems sensible, although it is also a novelty, since in the vanilla game a major factory is downgraded to a minor factory upon trading hands, but the only way a factory can be damaged in that game is via the SBR mechanic. Also outside the first turn G1, the capture of a major factory is somewhat rare. It happens on France, then Moscow/India/Berlin etc but for the game at that scale (g40) a lot of times that's pushing well into endgame territory.
So if we introduce the concept of damage that needs to be repaired as something that can crack off as part of the ground game and happens much more regularly, there may be knock on effects there. I worry a bit for unintended consequences, but I think it could work well if implemented as a general rule. The edge case would be where defender abandons factory, attacker has to decide whether it's worth the 3 PUs to shut down opponent's placement (likely, opponent would generally repair in the case of SBR so a bit of a wash) but then on the clap back or deciding whether that is worth it to reclaim. Or if all factories can be bombed to twice the value after that, having factories that are disabled continually might influence the back and forth calculus on whether it's worth it to capture such a spot and risk just the money sink. I mean spot worth 2 PUs but potentially an albatross of 6 in repair. Of course nothing says one has to repair them, so at the basic level, if we're still just going off production value, taking a territory is still going to be a net gain, and it's only if one is trying to influence the placement/repair dynamic that the money involved starts to drift a bit. Still the values there are relatively low. I worry a bit about introducing too much variability through the novel stuff, but this seems like it could work fine, and it fits the theme.
I guess the logical extension would be "but what about the Bases being damaged in such a way too?" or like for a scorched earth mechanic perhaps, which could be similar at the controller's discretion. I think this could also work, but again I worry about biting off more than I can chew, so I would probably put the fork in it, as potentially worth pursuing, but may need refinement in the finer details. One would think computer repair is more predictable probably than what a human player might do, but it's also kinda variable. I think we see sometimes the computer will not repair immediately, other times it may blow it's whole wad on repair, or repair when that's not really needed, or maybe screw itself by not repairing enough hehe. It's a bit difficult because on the one hand it would be much easier to use v3 style factories I think, but the scale of the game otherwise and the g40 roster and bases being involved etc. that all suggests the g40 factory scheme. It's a bit weird though cause like you pointed out, in that game factories/bases are not meant to be completely destroyed, but then the game will sorta violate it's own stated thing with the Chinese auto-removing a factory on those territories if they recapture a spot that starts controlled by Japan, but which is original owner China there.
The territories at issue in vanilla G40 would be Manchuria 2, Shangtung 2, Kiangsu 3. Korea is worth 3 but China cannot move on that spot. Of course they also can't attack into adjacent sea zones with their flying tigers, they have different treatment for convoy blockade stuff etc. Pretty involved. On that board there are no starting Japanese factories along the coast, they have to be built. Here they're already in place. In G40 where China can move is indicated by the double control roundel, shown in that game drawn on. Again sorta involved since in this game starting control/current control is indicated by the paint over color. We do have a control flag option which could be used to show original control in the way the capital puck remains unchanging, but to me that is visually very busy. Also sorta an artifact of the China rules I'm not sure we really need, since we're treating original control somewhat differently here for liberation when faction is without a original capital (eg how stuff is working for them and France right now.) Anyhow, I think I like it though, it feels like it's almost there.
We could trial it see how it works out, or what the computer is doing with it. Provided it doesn't mess up the overall thrust of the thing, I think it's an easy concept to get the head around, capture = damage. It might make sbr somewhat less impactful, but already the computer bombs an alright amount, just on account of more SBR units being around that can do it round to round hehe.
For technology, I think we just need to ditch the standard tech development for now. Also since if the G1 tech phase is when stuff is getting triggered in for like the VCs and tt properties etc using that method. I think that was the issue I was having earlier when if the German player was assigned HardAI, the VCs weren't triggering in for the display, whereas if I started the game as human and had it initialize, then I could save and assign to whatever and all the stuff would show up. For now though, I would just go no tech, but it needs to initialize I think to do all other stuff right?
There some standard techs development advances from G40 the Computer uses well, others not at all. Computer also won't purchase based on the tech advances it has already unlocked. So for example, faction X might roll super subs tech development, but then won't buy any subs. Or they roll radar, which is actually not too bad in terms of something AI can make use of, since it's more passive, but then won't buy any AAguns. Techs that are more useful, stuff like Jets, Long Range Air, Heavy Bombers etc, mainly because all nations tend to buy aircraft, but it's more an accident of their regular purchasing that those techs are useful. Paratroopers it whiffs. War Bonds and super production is uses well, but it's a total mixed bag there. I think for now better not to have development, and to introduce it later with stuff sorta designed around a token scheme and more techs that are universally decent, whether for the human player or computer player.
Anyhow point of the digression being, maybe there is an Industrial tech advance which limits the amount a player has to spend on repair, but not sure we should key the basic thing off that. I think if we can see it working in the no tech game, then we know it probably works alright generally, like proof of concept, after we can then consider what sort of Factory type Techs might be involved, once we know it's working. Right now the rail +1 is tied to operational factory, so it really depends on whether the computer will do it consistently, and not goof their movements too hard as a result of the repair needs. Human player will know what's going on so they probably will make better decisions on the fly