(How) Does Damage Affect Module Performance?

Solution 1:

Damage does not affect the performance of modules.

It only determines the frequency of malfunctions. (e.g. an FSD at 75% will start to malfunction - the more damage it takes the more it will malfunction)

The only module that has an incremental effect AFAIK is the canopy, that only shows visual cracks.

Keep in mind that a malfunction does affect the module performance so you might want to repair a module as soon as it drops under 80% to prevent performance loss.