The global push for sustainable energy solutions has made the development of efficient hydrogen storage materials a critical challenge. Among the leading solid-state candidates, magnesium hydrides (MgH₂) offer a high theoretical capacity but are hampered by sluggish kinetics. This work tackles this core issue by introducing a novel damage-controlled microstructural engineering approach for WE54 magnesium alloy (Mg-Y-Nd-Zr) that leverages hot extrusion and equal channel angular pressing (ECAP) to intentionally introduce beneficial defects. Thermomechanical processing was optimized to enhance dynamic recrystallization as well as controlled micro-crack development. Advanced electron microscopy and XRD analysis revealed significant grain refinement and crystallographic defect emergence. The crucial role of grain boundaries and engineered defects as high-speed diffusion pathways was validated by numerical simulations. This microstructural enhancement yielded a dramatic performance increase over the control: while the as-extruded WE54 exhibited a hydrogen absorption capacity of 3.5 wt.%, the optimized microstructures achieved 7.55 wt.% and increased the absorption rate from 0.5 wt.%/min to 1.7 wt.%/min. A detailed kinetic analysis provided quantitative evidence of this improvement, confirming that the engineered ECAP process substantially lowered the activation energy for hydrogen absorption to an impressive 40 kJ/mol. The presence of rare earth elements like Y, Nd, and Zr forms catalytic hydrides that substantially improves sorption kinetics. This study highlights the ability of strategic microstructural design driven by defect and grain refinement to enhance performance in hydrogen storage materials, offering a viable path for the development of clean energy technologies.