The Hood...
Was a marvelous warship, in my opinion maybe the lovliest Battleship/Battlecruiser type ever built, although the HMS Tiger original appearance might be a bit more graceful.
If I recall correctly (I'm still looking through my books), money wasn't the underlying issue as to why the Hood was never modernized. Mostly it has to do with the Washington and London Naval treaties, which set limits on how many capital ships a country could possess and more importantly set limits as to when they could be upgraded. For instance I believe the Hood couldn't have been upgraded until 1938 at the earliest, because that was 20 years after her original commissioning date. Also the Brits were limited to 15 Capital Ships. They had the 5 Queen Elizabeths, 5 R Class BBs, 2 Nelsons, 2 Renown class BCs and of course the Hood. They had to have a certain amount available at one time, and of all these ships (excepting the Nelsons) the Hood was the newest. They had to modernize and rearmor the REnowns because their armor was clearly inadequate by any standard. The Hood was considered marginal. The R Class were going to be replaced anyways by the KGV Class. And the Nelsons didn't need modernization. The Brits considered the Class of their battleline to be the QEs , the Hood and the Nelsons. Since the QEs were the eldest they felt they needed modernized prior to the Hood. They'd already modernized the Valiant, the QE, The Warspite, and the Renown, with a minimal armor upgrade to the Repulse. The hood was due in either '38 or '39. Maybe as late as '40. The money was there, but of course Hitler started WW2 and they couldn't afford to take the Hood out of service for 2 years for the upgrades. She would have come out looking very similar to the Renown. Her good looks would have been gone because the Hood was to receive a Tower Superstructure, much like the one on the Nelsons, the KGVs, the Renown and the Vanguard. So her grace and elegance would have been gone.
The Bismarck shot was a freak shot. i'm not sure if a deck armor upgrade would have made a huge difference. Remember after this upgrade the Hood might not have been able to even catch the Bismarck. By 1941 her speed was already marginal in that regard. It should also be recognized the Hood would have been a modernized warship, VICE a modern one, and there is a difference. No matter what they did she would have had an incremental armor scheme, vice a modern one. Also, no pre 1935 ever fought a post 1935 battleship and ended up winning. While a very over rated design, the Bismarck was still a tough nut to crack.
Personally I've always been befuddled as to why the Brits didn't save the Warspite. She had a marvelous record, in two World wars and may have been the most decorated warship in history.
Tron