With the added Damage reduction, no. Itīs an absolute Trap.
Where I would say it is balanced. What is more important on this attack? You gaining edge, your victim not gaining edge, or you doing one additional point of damage. Choose well.
That 1 point of damage has about the same worth than 1 Point of Edge. So that assertment would be somewhat true
if the Ammo choice is guaranteed to give you an Edge (or denying one).
However, itīs quite likely that this measly +2 AP increase is
not going to make the difference that either grants you and Edge or denies Edge. Not to mention the 2-Edge-per-round limit

And in that case, itīs just a pointless damage reduction without
any benefit.
Not to mention that increasing AP as mechanic doesnīt really care if the target has Armor.
Another Suggestion: Drawback: Decreases Damage by 1 as before (regardless of the type of target).
Benefit: Cut the following ratings in half (round up) for the target: Armor, Hardened Armor, Cover.