According to UDE official Rulings that "Gearfried the Swordsmaster" can activate its effect during Damage Step, if there is an equip card attached to it at that specific time, but can you use its effect to destroy the attacking monster during the damage step, as far as I know that there is no replay during damage step. ;)

Netrep

The effect of "Gearfried the Swordmaster" can activate even in the Damage Step. For example, if "Brain Jacker" is attacked by "Gearfried the Swordmaster", and "Waboku" was activated earlier in the turn, "Brain Jacker" will equip to "Gearfried the Swordmaster" and the effect will activate. In this case, the effect of "Gearfried the Swordmaster" will activate after the effect of "Brain Jacker" resolves, and the controller of "Brain Jacker" will select which monster to destroy.

If someone attacks your "Gearfried the Swordsmaster" with "Black Luster Soldier - Envoy of the Beginning", during damage step, you equip "Gearfried the Swordsmaster" with either a "Blast with Chain" or "Metalmorph", thus its effect is triggered, can you destroy the attacking monster which is "Black Luster Soldier - Envoy of the Beginning" in this case, if yes, how can you calculate the battle damage during damage step, because I know that there is no reply during damage step.

Another question is, do "Gearfried the Swordsmaster" 's effect activate after the equip card's resolution chain resolve or it activates right away? For example, if someone special summons "Thousand-Eyes Restrict" and using priority to absorb your face-up "Gearfried the Swordsmaster", then you chain "Blast with Chain" or "Metalmorph" equipping to your "Gearfried the Swordsmaster" that is being targeted by "Thousand-Eyes Restrict", thus "Metalmorph" or "Blast with Chain" is step 2 of the chain thus resolves first, so which 1 of the following 2 cases is correct:

Case 1: "Gearfried the Swordsmaster" 's effect activates right after the equip card is equipped to him, thus destroy "Thousand-Eyes Restrict", so "Thousand-Eyes Restrict" 's effect disappear since it has to be face-up on the field by the time its effect resolve, otherwise you cannot equip a card to it.

Case 2: "Gearfried the Swordsmaster" 's effect starts a new chain, thus "Metalmorph" or "Blast with Chain" equipped to it, triggers its effect, then it is absorbed by "Thousand-Eyes Restrict", the equip card resolved in step 2 going to graveyard, then the new chain starts, destroys "Thousand-Eyes Restrict".

1) Because you destroy the attacking monster in the Damage Step (and like you said, a replay cannot occur), the Damage Step simply ends (unless you destroy something like Sangan, in which case it will resolve and then the Damage Step will end). It's a lot like with the Mystic Swordsman LV# cards, the enter the Damage Step, destroy the monster, then exit the Damage Step.

2) Case 2 would be correct. Ruling #5 under Gearfried the Swordsmaster:
The effect of "Gearfried the Swordmaster" is a Trigger Effect that can be chained to, starting a new chain after the current chain resolves. You can chain "Divine Wrath" to the activation of this effect.