Personally I'm not planning on using the over pen rules, but if I did I might just apply it when the difference was 4 or 5.
That would make it more difficult for BB's to take out destroyers but that is about it.

You're not doing anything wrong; that's just a consequence of the two rules interacting (end armor and overpen).

Frankly, I don't see where the issue is -- if you're using the overpen rule, that means you're wanting to account for the fact that some shells are just too massive for some targets. When going after an end-on target with AP5 shells, that's going to happen.

My thought would be to only use the over-penetration rule when not crossing the T.
When crossing the T a shell is likely hit at an acute angle & therefore travel further through the hull or superstructure, thus more likely to cause damage?

Let me clarify my line of thought....

Completely agree the principle of over-penetration equating to large calibre shells not exploding when passing though no/low armour.

I meant more likely to hit at a shallow angle in relation to the target centreline, rather than more likey 'to hit' per se.

Such a shell penetrating the target bow/stern is likely to travel the length of the target ship rather than across the width, so the chances of cumulatively hitting something more solid increases, i.e. multiple armoured bulkheads, engine, boilers, magazine, etc.

Probably just me over-thinking !