Ok....I follow your math upto the point where you convert the 3.5% reduction on DPS but not sure on how you get it to the 2.46% defense.

Post mitigation DPS is ~512. 18 DPS 3.5% of 512 (you got this). The same 18 DPS, however, is identical to ~2.46 Defense though it requires some algebraic manipulation to see it easily: 2000 * (1-(.3+x))*(1-(.65*.6))*(1-.4) = (512-18); or 2.51 (I got 2.51 Defense rather than 2.46, but it's close enough to KeyboardNinja's for our purposes, especially since it's likely caused by some rounding errors).