I'm considering to change PM into an accelerated ability, similarly to the hermetic arts.
Ability progression would cost (level to acquire) XP (dropping the factor 5). To compensate, MR would be only to the ability level (again, drop factor 5).
My goal is to smooth PM progression a bit, and I don't think this could change game balance a lot. An exception may be that choosing "Puissant Parma Magica" is a less potent virtue even if allowing to get a +3 like "Puissant (Art)".
First of all, I do not think that having MR from parma grow in multiples of 5 rather than 1 is such a big deal, considering that there are a lot of other factors involved like form resistance. So, the hourerule tackles something that I feel is a non-issue.
Perhaps more importantly, the rule has a very strong side effect. If you allow parma to increase like an art, but offer MR only equal to the score rather than to the score times 5, you seriously reduce the effectiveness of parma. To see it, note that to multiply by 5 a score (whether an art score, or an ability score) you need to spend almost 5x5=25 times the xp, because the "cost" of a score increases quadratically (it's actually a little less, but it grows to become close to 25 pretty quickly). Now, if you cut down the 5x multiplier provided by parma, it means that you need a score 5x larger to provide the same MR, which requires almost 25 times more xp. Making parma an accelerated ability only divides the cost by 5. So, to achieve the same MR from parma, your house rule requires almost 5 times as many xp.
Examples: under the current rules you need 50xp to have parma 4 and a MR of 20. Under the house rule, you need 210xp to have "accelerated-parma" 20 and a MR of 20, or 4.2 times as many xp. Under the current rules, you need 180xp to have parma 8 and a MR of 40. Under the house rule, you need 820xp to have "accelerated-parma" 40 and a MR of 40, i.e. more than 4.5 times as many xp.
Considering that parma is currently, if anything, a bit underpowered (though better than in previous editions) this is a significant change in the wrong direction, at least in my opinion.
Actually, protecting others does not lower your effective parma by 1 per person.
It lowers your effective parma by 3, and you can cover 1 additional target per point of parma.
But the point is basically valid. So, the new houserule has even more impact!
It makes it 80% less expensive (in terms of MR reduction) to "cover" others, and you can cover more people. This encourages magi to cover grogs, and perhaps mounts (contrary to the Tremere military doctrine of which we read in HoH:TL), even though everyone now is substantially less protected. I don't think it's enough to have such a huge impact on the social aspects - I mean, being able to "protect" say 18 mundanes (171xp under the houserule) rather than 8 (180xp under the current rules) is nice, particularly if you like having really large groups of grogs, but does not alter substantially the fact that you can only cover "relatively few" people beyond yourself. Note that the MR afforded in this case to the 19 mundanes would be 15=18-3 under the new houserule, and 25=5x(8-3) under the old rule.
Personally, I think that the parma is already rather generous in terms of extending coverage to others; what it's "stingy" about is the amount of protection afforded to the magus. I don't see a house rule that "expands" parma in the former direction while reducing its effectiveness in the other something that has a positive or neutral effect on the game.
One of the earliest assumptions of play was that grogs are useful and important, even when a magus is around. But the game rules have always modeled a different reality, in which grogs and magi share a stage poorly: Grogs usually get in a magus' way, being fragile and relatively ineffective, except when the plot is contrived to give them a role.
Giving grogs the full protection of a magus' MR, even when they are not directly in line of sight makes grogs less fragile, and increases the desirability of having a magus venture forth with a coterie of grogs, even on a grogs-only adventure.
Previously posted rules variant in support of this:
A magus can extend full MR to a number of other people equal to his Parma score.
A trained shield grog close to his magus can automatically interpose himself between the magus and a physical attack and become the target of that attack, unless this is unreasonable, perhaps because the grog is too far away or is surprised. So a shield grog might be able to fling himself upon his magus and take the full brunt of a dragon's fire but not a dragon's poison breath.
Really, being able to protect 6 grogs with "standard" parma 6 (105xp) is not enough, and you feel you need to protect 14 with the "houserule" parma (again, 105xp)? No wonder in your games grogs get in a magus' way. A gaggle, not a turb, for sure! Note that even the houserule you proposed (not the one from the OP, instead "A magus can extend full MR to a number of other people equal to his Parma score") increases the "power" of Parma, but not the number of protected grogs.
I have to add that my games evidently play rather differently from yours. Grogs do not share the stage poorly with magi, quite the opposite. Magi are very, very rarely found without grogs, and for good reason. Grogs are extremely effective protection in many cases (save against direct magical effects, for which Parma is usually enough), provide specialized skills that magi rarely have the time or inclination to learn, and frankly, if properly trained and led, they can be a terror in combat (compare half a dozen well-trained longbowmen, led by a grizzled Leadership 8+2 sergeant, with a magus capable of multicasting 4-5 Balls of Abysmal Fire...)
My main thought was that if the magus can extend their parma to 18 people that would be 18 people who were temporarily unaffected by the gift. That could easily be a small dining hall, or an armed group of men that it would be easier to talk to then fight...