I built a mob drop grinder in a SMP world. The zombies fall and receive damage but not as expected.
I expect when removing blocks for mobs to take steadily increasing damage and therefor to have to punch them (empty hand) like so: 3 hits, remove a block, 2 hits, remove a block, 1 hit, remove a block, instadeath. (3,2,1,0 hits)
What happens is that they are 3, 2, 2, 0 - hits as I remove the blocks.
I switched to a local SSP world and built the drop grinder and got the same results.
Plans for the base drop grinder: http://www.vavo.dk/minecraft/xp/xpblueprint.htm
I changed the fall length by simply adding/removing blocks from the floor of the drop shaft.