Does my crit reduction from defense have diminishing returns?
No, and neither does crit reduction from resilience. You can see this by taking your defense skill, subtracting the base 400 (assuming level 80) and multiplying by 0.04%. For example, my defense skill a the time I wrote this was 553. Subtract 400, leaving 153, and multiply by 0.04% gives me crit reduction of 6.12% – exactly what the tooltip tells me I have.