Howdy, Stern, and welcome!
Here's the answers to your questions:
1) If a Red weapon stabs your shield does that count toward breaking it? I myself wouldnt think so sense that would be the equivalent to a Green weapon stabbing it.
It does not count towards breaking a shield. Your analysis is exactly why. Red damage is swung only.
2) I saw many polearm soldiers with small shields on their upper arm. Does this count as a shield still or is that armor by that point?
This would be a shield.
3) If a Red Weapon goes for a smash and I block its main hit with my sword, but it still touches my shield, does that still count toward breaking my shield?
It'll depend on how good of a block it was. If you barely manage to slow it, but it still hits your shield with sufficient force, then yes, this still counts as a hit to the shield. If, however, the opposite is true and you block the majority of it, but the striking surface still lightly touches your shield then: no, that wouldn't be considered sufficient force.
This one can be a bit tricky as you need to make sure that you have a good understanding of sufficient force. It's very difficult to explain online, but if you have any groups locally you can visit with, someone will be able to help you understand where to draw that line.
4) So we are working on some simple leather armor (chest, arms, and fighting shoulder) and this interesting idea came to mind. If lets say I lost my shield and someone was coming in for a attack to finish me off. Could I use my armored arm to absorb the hit to close this distance and finish them off?
Yes, you could indeed. Generally speaking, however, most people swing much faster than you'd be able to close the distance, so often times this doesn't end up being a practical tactic in anything except single sword 1v1 fights.
Let us know if you have any other questions!