Refer to this thread for the basis of what I'm going to say:
http://slickproductions.org/forum/index.php?topic=401.0If the armor bit is set to have protection vs holy, you are weak against the Darkness elemental. If the armor bit is set to have protection vs Darkness, you are weak against Holy.
This new info explains why both bits are set in this instance.
This info will explain why the game engine isn't using this bit... enemies were meant to have elemental attacks. The problem with it was that if you were able to protection to both stats for magical reasons, it would hurt you for physical attacks, just like Ice+Fire equipment.
The entire Dark Knight's equipment was most likely meant to be resistant to Holy (this means he was weak vs Darkness), which also means extra pain vs Zombies (they were to attack with the Darkness elemental).. and that also probably meant that the Paladin's initial equipment was meant to be resistant to Darkness (which means weak vs Holy), making Cecil very resistant vs all of the undead at Mt. Ordeals, although all of the equipment has resistance vs Undead, so it's almost irrelevent. Then again, Holy attacks/spells would rape the Paladin...
It is the same logic that the Fire Shield has you weak vs Fire and resistant to Ice and the Ice Shield has you weak vs Ice and resistant to Fire.
This behavior is probably completely fixed in FF4A.