The easiest way is to just remove multiples of the average on the damage dice. If someone's throwing 2 dice, but 3 DCs are represented by those two dice, and there's one less DC because of damage negation, I would just remove a 1/3 of the damage and call it a day. This is not entirely in the spirit of damage negation, but seriously, life's too short to figure out how to get players to roll 1.66 dice.
I'm kind of curious, though, how people handle max DC for things like HKAs and breakable foci. If I max out my HKA, and I still have Str left over, does Damage Negation stop the excess Str from reinvigorating the attack? So, if I had a 1d6 HKA and 30 Str, I max out at adding 3 DCs, but I could potentially add 6. If there's three levels of DN against me, do I have a 2d6 HKA or a 1d6 HKA (assuming that no one rules that the DN stops the HKA damage first and therefore stops the potential Str bonus altogether)?