The storm-troopers are the backbone of the Empires "infinate" (accoarding to General Rham Kota ^_^) Army. Things had to be mass produced--and I am sure that even the Empire had somewhat of a budget. You just cannot produce good armor when you have to supply it for so many people, it just costs too much. Yes, they gave good armor to those that were trained extensively and were much more skilled beings that went on covert, dangerous missions.
I myself see the stormtrooper armor as essentially an environment suit that regulates temperature, ect. while to an extent, protecting you from the environment around you. It might protect you from light arms fire, and that isn't even saying much. And as someone here said, shrapnel. Makes sense to me.
Mind you--this is purely spectulation.