Are you sure the dwarf was actually wearing the iron helm? I am pretty sure iron should block all punches, although I am not certain how strong a legendary puncher would be.
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But I'm 100% sure helm doesn't block all punches, unless the target is unconscious.
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The reason the helm blocks all punches when the target is unconscious is that then the AI targets ONLY the head. At other times there is a chance of it targeting facial features, which are not covered by helms. However, Dwarf Fortress also doesn't allow for a very strong punch to the eye, for examples, to also damage the skull, as it doesn't currently model facial features as being located on top of the skull.
In other words, for the dwarf to have his skull caved in, as you reported, the AI would have to have scored a hit which targeted the head through his iron helm. I do not believe this is possible, and will try to test it if I have time. For now, I maintain that you are mistaken in your report. I do believe that your dwarf died from being punched, (maybe in the throat for example?), but not to the head while wearing a helm. It is also possible that he had dropped his *Iron Helm*, and was on the way to pick up a better quality one when he got interrupted for punishment...
Edit:
OK, so I tested it, and it does seem to be possible. I am quite confused by this, as even bolts with their tiny contact area and very large momentum can nearly be blocked by iron helms (if you mod them to be just a little slower). I assumed that dwarven fists must have a much larger contact area than bolts, and in many years of playing adventure mode I could swear I've never seen a punch penetrate iron armor. However, I placed a modded dwarf with maxed out strength and size in the arena, and gave him grand master fighter and striker, and indeed he did explode a regular dwarf's head right through an iron helm with one heavy punch. I guess grossly underestimated just how lethal a year or so of training makes a dwarf
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Also, FYI, even a steel helm doesn't seem to be enough to stop the punch of a dwarf with 4500 strength. The head doesn't explode in one hit, but the skull is still bruised. After 4 hits, "the injured part collapses". I also found that a normal dwarf with grandmaster striker/fighter could do damage through an iron helm, although again much less.
Here's the relevant modding of the dwarf:
[PHYS_ATT_RANGE:STRENGTH:4500:4500:4500:4500:4500:4500:4500] +
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[BODY_APPEARANCE_MODIFIER:HEIGHT:125:125:125:125:125:125:125]
[APP_MOD_IMPORTANCE:500]
[BODY_APPEARANCE_MODIFIER:BROADNESS:125:125:125:125:125:125:125]
[APP_MOD_IMPORTANCE:500]
I believe these are the maximum possible size and strength for a dwarf, if you take a dwarf starting with the highest possible base strength (2250) and train them to max. In other words, its quite likely that steel helms will be enough for anything you are likely to create in game. Certainly for goblins, as they don't benefit from dwarven training. That being said, the throat is not protected by any plate armor, and having it collapsed by a punch is...bad.
I did also confirm that attacks from normal dwarves with dabbling skills will be stopped by iron armor, which agrees with my experience from adventure mode.
TL:DR - don't assume your dwarves armor will protect them from justice punishments. Either don't assign anyone to be hammerer or captain of the guard, or assign pansies with wooden/candy crossbows/hammers.