Well, I tested it in two or three battles, and it didn't noticeably reduce the armor of the unit that got hit (right-clicking on the unit after it got hit). So if it's working for you and showing up in the unit details in battle, I don't know what's occurring. There shouldn't be any mod conflict because Enzo's Knife comes from the Loot Pack DLC and you are not allowed to include even the abilities in regular mods, AFAIK.
Any other reports, one way or the other? Have some people seen it noticeably reduce armor (Enzo Effect or such, -1 to Armor) in the unit information in battle?