Defends specifically negates Attack. Useful changes circumstances.
Being insubstantial means that a directly physical attack doesn't apply to you, in the same way that a teleport power that moves you five miles away from the attack would simply mean it doesn't apply to you. It doesn't matter how good of a shot it was because the target was invalid. It's like shooting someone's words or trying to damage the ocean by shooting bullets into it. But the effect also does not specifically resist damage because, as we agreed below, energy attacks still apply (as might other problems).
Insubstantial cuts two ways. Check it: "in·sub·stan·tial : lacking strength and solidity". As I see it, if you turn insubstantial then you can't do anything either. So no shooting or punching back.
Farther, "insubstantial" is pretty broad. In fiction powers often have reasoning behind them. People who are "insubstantial" and use that to phase through matter might require the matter be slow moving, so bullets and speedy object aren't affected.
Wild Talents favors home balancing because every hero game is different. The real question is what does the player intend to do with the power? If the player is trying to make a really cheap form of physical immunity so they don't take damage than disallow the power. If they have a reason for picking the power that balances well against what other players are paying for their own abilities than I don't see a problem that it has the side effect of sometimes letting you avoid damage.
Remember, it's Wild Talents. It's a superhero game. Trying to apply real life "rules" to the game doesn't really work. Unless, of course, you want to play in a world that deals with 'reality' intermixing with superpowers.
With defends, it allows you some level of protection even if you didn't choose to be immaterial on your turn (as it opens the power up to being used in response to an attack).
Claive makes a good point here. If the power is Useful and you want to active it to avoid damage than it's all or nothing. If you beat their Width than you active first. If not, than you get hit and loss a dice from the set, you don't get to Gobble like you do with Defends.
So, let's say you get attacked with 3x10. Using the power previously listed (2HD) you'd get hit because 2x10 isn't fast enough to active before the attack. So you take all of the damage. But a 2HD Defends about cut the 3x10 down to 1x10 because it Gobbles and break the attack's set.
