So I've read stories about how people have had goblins shoot through fortifications to kill dwarves standing two levels above them. Is this normal, or a fluke?
What do you think fortifications do, exactly? They're not walls, they're just "better than nothing" for defending archers.
They stop some arrows, not all. The further the archer (NOT "the enemy"!!!) is from the fortification, the more they stop. They're happy to stop dwarven bolts as well as siegers' arrows, which is why you want your dwarfs up next to them (0 chance of stopping) and the enemy as far as possible.
I could do it with walls too, since monsters cant destroy walls.
If you build walls, then the enemy could, in theory, hide up next to those walls and be safe. Note that the game engine is not smart enough to tell them to do this, but they could do it by accident, like if they're trying to path around your defensive position.
The only disadvantage of height is that you lose some range - it seems -1 range/+1 z-level diff, up or down. The disadvantage of being lower is Line of Sight - lost faster against higher targets.
The advantage of a tower is that for 8 stone you can build a 3x3 hollow tower that then protects your masons who can continue to work inside it - that's fast, 100% protection, and a channel is no protection against archers or "being scared". (I like to dig tunnels to the site and have a stair up to the archer towers, for just those reasons.) 2 more stone for the staircases plus 16 for fortifications (plus 4 stone floors which are then deconstructed for corner fortifications) and you're done, with minimal impact on the level below ground.
Also, tower fort'ns can be built above a siege engine bunker on the target's z-level, if that appeals to you.
But with ground-level fortifications and a distant (5-10 tile?) channel, you have a clear line of sight plus a good stand-off distance from enemy archers. Some players just don't like (or have room for) the ditches everywhere.
But a lot is personal preference, I'll admit.
I've heard that bolts do less damage when fired up z levels
APC, you keep repeating things that I've never even heard a
rumour of. Not that that's any measure, just saying. Where did you hear this?