That part is intentional. Using deathward to bypass item down sides was always something I wanted to see fixed. This is not to be confused with the "DeathWardFix" option by Kaedrin. For details on that you can check out his site. It is not on, so not sure if you really need to.
While we are on the subject of Deathward, and item down sides. I am updating several popular items to reduce or remove their downsides. I am not doing a full scan, so if you have any items you think has a higher negative / downside than it should, please let me know and I'll review.
I would say it would be good to modify Iron Body to remove or lower the penalties but I think reverting deathward is in order. I'm trying to give the server street cred by standardizing the content more, but then again, it's just going to piss off people and I'm pretty burned out from all the work that had to be put in to get everything done. So, I'll revert death ward tonight for RoT. For CEXP, we will use the new version.