On cages:
Cages are one of the main types of dwarven magic (the other really obvious one being the bookkeeper). Things in cages can age, and clothes can decay, and dwarves still get fed and watered, but that's about it. Marksgoblins in cages can't fire out, things inside can't drown when dropped in water, can't suffocate due to running out of air due to having been underwater for months, can't be hurt by their cage falling vast distances (the last time I tried it, which was admittedly in 33a or so - dropped a wooden cage holding a goblin 11 or so stories onto wooden spikes, and the cage, goblin, and spikes all survived unharmed), and so on.
They do have one weakness, though - wooden cages at least - Like matter and antimatter, if you drop a wooden cage into magma, the cage and everything inside it vanishes (last time I tried it, in 33g?) (Alas, no magma is destroyed in the process, and no energy is generated*). Even if there are bones inside the cage, you don't end up with bones in the magma - everything just vanishes. (I haven't tried with non-magma-safe metal cages, though, and I did have temperature on. And, I bet iron and steel cages would just sit in the magma and protect their contents.)
* = Unless the remote fire starting bug still exists.
On pitting goblins:
I haven't seen any goblins escape when being tossed into a pit when their cage was right next to said pit (unless I ordered more than one goblin pitted at a time) - but I have seen a small portion of those pitted goblins (say around 5%) survive the 14 story fall down said pit with no injuries (Every other goblin exploded into their component parts on impact).
The pit was a simple 5x1 channeled out area going all the way down to a floor 14 stories below. Presumably the goblin ninjas could have somehow grabbed the walls and held on or something.
(I reported this but it wasn't easily reproducible, so I don't think it has been fixed)
Side note: I've had a great deal more goblins dropped by having hatches open underneath their feet (with no walls in reach or anything), and none of those ever survived the fall.
[ March 05, 2008: Message edited by: Shadowlord ]