Active fault zones have complex structural and geometric features that are expected to affect earthquakenucleation, rupture propagation with shear and volumetric deformation, and arrest. Earthquakes, in turn,dynamically activate co-seismic off-fault damage that may be both distributed and localized, affecting faultzone geometry and rheology, and further influencing post-seismic deformation and subsequent earthquakesequences. Understanding this co-evolution of fault zones and earthquakes is a fundamental challenge incomputational rupture dynamics with consequential implications for earthquake physics, seismic hazard andrisk. Here, we implement a continuum damage-breakage (CDB) rheology model in our MOOSE-FARMS dynamicrupture simulator to investigate the interplay between bulk damage and fault motion on the evolution ofdynamic rupture, energy partitioning, and ground motion characteristics. We demonstrate several effects ofdamage (accounting for distributed cracking) and breakage (accounting for granulation) on rupture dynamicsin the context of two prototype problems addressed currently in the 2D plane-strain setting: (1) a single planarfault and (2) a fracture network. We quantify the spatio-temporal reduction in wave speeds associated withdynamic ruptures in each of these cases and track the evolution of the original fault zone geometry. Theresults highlight the growth and coalescence of localization bands as well as competition between localizedslip on the pre-existing faults vs. inelastic deformation in the bulk. We analyze the differences between off-fault dissipation through damage-breakage vs. plasticity and show that damage-induced softening increases theslip and slip rate, suggesting enhanced energy radiation and reduced energy dissipation. These results haveimportant implications for long-standing problems in earthquake and fault physics as well as near-fault seismichazard, and they motivate continuing towards 3D simulations and detailed near-fault observations to uncoverthe processes occurring in earthquake rupture zones