I believe that all forms of casting are treated as the "Paralyzed" game effect while the spell is being cast, with the resulting penalties to defense.
So, yes, your chance to defend pretty much goes away.
On the other hand, if you're casting (waiting for a target doesn't count - must be in the middle of a spell) when you get hit by another paralyze effect, such as the webs of Navrey or Mephitis, the webs won't affect you - which makes a mage with protection really effective against Navrey. Not sure if Protection works to allow Chivalry to be cast without interruptions (though the spell now functions as works until dead, then must be recast, and anyone can cast it from scroll, even at 0 magery)
