Either method works for me, but we need to decide on one or the other. We can't have it both ways.
Personally, I would prefer to use the Touch AC + Effective DR method. It's not the
simplest way to resolve the issue of hitting a target vs damaging them, but I think it's the most reasonable way to do so within the rules.
I agree that Pathfinder damage values for firearms are a bit too low. Those used for
D&D Modern firearms are much more reasonable, IMO. 2d6 for most pistols, 2d8 to 2d10 for most rifles.
Reload times are an issue for me that are pretty much make or break. Single-shot personal firearms which require manual reloading after each shot, such as muzzle-loading rifles, are completely unacceptable. Self-contained cartridges are essential for this to work, along with a firing mechanism which allows for multiple rounds to be loaded simultaneously as part of a single action, either in the cylinder of a revolver or a clip/magazine.
This is one of the engineering hurdles that would have to be overcome before ever considering mass implementation of firearms among our forces.