While in /vanish, players can still see your armor

EssentialsX version (/essentials):
2.0.1 (Source)
Server software (/version):
PaperSpigot 1.12.1
EssentialsX config (if applicable):

Could you run /version and /essentials from in-game?

version
[12:10:31 INFO]: This server is running Paper version git-Paper-1183 (MC: 1.12.1) (Implementing API version 1.12.1-R0.1-SNAPSHOT)
[12:10:31 INFO]: Checking version, please wait...
[12:10:33 INFO]: You are 3 version(s) behind
essentials
[12:10:53 INFO]: CONSOLE issued server command: /essentials
[12:10:53 INFO]: / <reload/debug>
essentials debug
[12:11:02 INFO]: CONSOLE issued server command: /essentials debug
[12:11:02 INFO]: Essentials 2.0.1-bSNAPSHOT debug mode enabled

When a player executes /vanish it will remove the command executor from the game for all online players except for those who have essentials.vanish.see, which is commonly operators and staff in general.

If you can see vanished players, then you will see them with an invisible potion, but again only those with essentials.vanish.see. So make sure you give that permission to those who can be trusted.

Pretty Sure, it was essentials.vanish.effect causing it to just give invisibility and NOT full vanish

essentials.vanish.effect is what gives the invisibility effect. But again, you would only see the player if you had essentials.vanish.see.