Just to make sure you haven't let anything obvious slip past your attention, but are your dwarves actually WEARING HELMETS? Not just have them assigned, but have helmets as their physical headgear. If dwarves have Caps of any kind as part of their clothing, and your armor is NOT set to replace clothing, then this will prevent your dwarves from donning proper protective headgear and so leave them vulnerable to head injuries.
Alternately, what item are you using in the pummeling-chamber?
My Dwarves are wearing the following: Cloth Hood, Copper Helm, Cloth Cloakx2, Copper Breastplate, Cloth Gloves, Copper Gauntlets, Cloth Trousers, Copper Greaves, Cloth Socks, Copper High Boots, Copper Bucker/Shield, and Weapon of Choice.
Also I have it set to replace clothing and exact matches. I also verified their inventory before sending them into the popcorn popper lol. It seems all well and good til the first broken nose or ear. I've even tried reinjuring them with a more serious wound so they'll goto the hospital to get cleaned with soap and stitched. Which does no good for the ears but they do get cleaned so I always hope it's enough but I've had a 100% mortality rate with it so far. As soon as I get broken ears I know they are done for. Course I saw someone say the 34.11 version infection rate is higher.
I'm using Sweet Pod Seeds to pummel with.