Whether you are inspecting fall arrest or rescue equipment, one of the issues you'll confront is whether to retire the gear or return it to the cache. For students in both our rescue operations and fall protection competent person classes, being able to inspect equipment and answer this question is one of the key learning outcomes.

If you are administering a comprehensive fall protection program (as described in ANSI Z359.2) your organization should have consistent criteria for when to retire equipment. This criteria should address the age of the equipment, acceptable levels of wear and tear, and whether that equipment is still appropriate for the work and rescue activities being undertaken.
Unfortunately, few organizations have developed these sorts of guidelines. They tend to leave it to the judgment of the equipment inspector and different inspectors may use different criteria.
The good news is that life safety equipment, body harnesses in particular, are capable of withstanding much more force than the human who is wearing them. For example, if you fell and imposed a 1,000 to 1,400 pound arresting force on your dorsal D-ring, each of the four legs of webbing that run through the D-ring might be exposed to 300 - 400 pounds. The harness straps (almost two inches wide) are rated for at least 7,000 pounds. Likewise the sewn, load-bearing splices are rated for 5,000 pounds. So the minimum safety factors are somewhere around 10-15 times the applied load (and in reality, they are probably much higher given additional safety factors the manufacturers build in).
So if we're trying to determine how many broken stitches or burn holes are acceptable in a harness, we could probably have quite a few and the harness will still function (we hope!) But who's willing to strap on a harness with ten broken stitches, four burn holes, lots of UV bleaching, and go climb a lattice tower? Not me, nor anyone whose safety judgment I would trust.
So the question of levels of acceptable damage cannot be answered by analyzing the capacity of the equipment and whether the damage has compromised the equipment to the point of failure. This is life safety equipment and we do not use equipment right up to the point of imminent failure (or anywhere close to it).
Why? I think it's because of the message it sends to our workers.
We expect those who rely on this equipment in high-hazard environments to make informed decisions and to take specific actions to ensure their safety. If we provide them with equipment that appears to be compromised, we are sending the wrong message. In essence we are saying that since the organization is willing to provide substandard gear, that same organization is probably willing to accept substandard performance from their workers.
Workers are fully aware of the decisions made by organizations, especially when it comes to life safety. And there perceptions will color their attitudes and actions. So even if it is impractical to provide essentially new equipment to every worker, it is very practical (and, in fact, required) for the organization to provide equipment that works as well as new.