So if I understand this correctly, if he is next to a Shi'ar w/ a 17 defense, they aren't affected by the Defend and would thus get an 18 defense. If I understand it correctly, that is a well spent 33 with the addition of perplex.

"Modify" refers to the +1 increase. Defend "replaces," instead of modifying. And the order of operations is "replace, then modify," so he can stand next to a Shi'ar and share his 17 D with them, and ALSO give them a +1 to bring theirs to 18 D.

In addition, you get to choose when Defend activates- so even if another Shi'ar has a 17 D already, you can still activate Defend for them and get the +1.