Conventional paints for conversion coating applications in steel production derived mainly from water-based polymer dispersions containing several additives actually show good general performance, but suffer from poor scratch and abrasion resistance during use. The reason for this is because the relatively soft organic binder matrix dominates the mechanical surface properties. In order to maintain the high quality and decorative function of coated steel sheets, the mechanical performance of the surface needs to be improved significantly. In fact the wear resistance should be enhanced without affecting the optical appearance of the coatings by using appropriate nanoparticulate additives. In this direction, nanocomposite coating compositions (Nanomer$^{(R)}$) have been derived from water-based polymer dispersions with an increasing amount of surface-modified nanoparticles in aqueous dispersion in order to monitor the effect of degree of filling with rigid nanoparticles. The surface of nanoparticles has been modified for optimum compatibility with the polymer matrix in order to achieve homogeneous nanoparticle dispersion over the matrix. This approach has been extended in such a way that a more expanded hybrid network has been condensed on the nanoparticle surface by a hydrolytic condensation reaction in addition to the quasi-monolayer type small molecular surface modification. It was expected that this additional modification will lead to more intensive cross-linking in coating systems resulting in further improved scratch-resistance compared to simple addition of nanoparticles with quasi-monolayer surface modification. The resulting compositions have been coated on zinc-galvanized steel and cured. The wear resistance and the corrosion protection of the modified coating systems have been tested in dependence on the compositional change, the type of surface modification as well as the mixing conditions with different shear forces. It has been found out that for loading levels up to 50 wt.-% nanoparticles, the mechanical wear resistance remains almost unaffected compared to the unmodified resin. In addition, the corrosion resistance remained unaffected even after $180^{circ}$ bending test showing that the flexibility of coating was not decreased by nanoparticle addition. Electron microscopy showed that the inorganic nanoparticles do not penetrate into the organic resin droplets during the mixing process but rather formed agglomerates outside the polymer droplet phase resulting in quite moderate cross linking while curing, because of viscosity. The proposed mechanisms of composite formation and cross linking could explain the poor effect regarding improvement of mechanical wear resistance and help to set up new synthesis strategies for improved nanocomposite morphologies, which should provide increased wear resistance.