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Bards' Weapon and Armor Proficiency states:

Bards are also proficient with light armor and shields (except tower shields). A bard can cast bard spells while wearing light armor and using a shield without incurring the normal arcane spell failure chance.

Dwarves' Favored Class Bonus states:

Reduce arcane spell failure chance for casting bard spells when wearing medium armor by +1%. Once the total reaches 10%, the bard also receives Medium Armor Proficiency, if he does not already possess it.

Does that simply add medium armor to what the bard can wear and not incur spell failure penalties to, or just give him the proficiency to wear it, and use the 10% reduced spell failure chance in conjunction with what the medium armor would give?

Let's say I am a level 10 Dwarf Bard. I now have Medium Armor Proficiency. I decide to wear a breastplate. A breastplate gives a 25% spell failure chance. Would I only have a 15% spell failure chance while wearing the breastplate, or would I simply not incur the spell failure chance, like I would with light armor?

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You would have 15% spell failure chance because the Bard's proficiency references, with added emphasis:

...bard spells while wearing light armor and using a shield without incurring...

This does not affect you when you wear Medium armor.

This Forum might help you find other ways to accomplish your goals, though.

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