I have bumped up the Head damage multiplier, but this has the effect of making enemies in power armor much more susceptable to headshots.

I thought I had come up with a simple solution to this. Just add two object effects to the helmet
-One that increases damage resistance when shots hit the head (with a GetHitLocation condition)
-One that increased health by a small amount when shots hit the head (also with a GetHitLocation condition). This should have made powerarmor helmets virtualy (and more realistically) impenetrable to pistol shots.

Unfortunately, neither of these functions seems to have any effect whatsoever.
Any idea why not, and how this could be fixed?

http://geck.gamesas.com/index.php/GetHitLocation
GetHitLocation only returns a value within certain contexts.

Yeah, I noted the provisos that;
"GetHitLocation won't work if used in a weapon's Object Effect, but will work if used in the weapon's Crit Effect.
GetHitLocation will only return the correct value in a GameMode block in the frame that the reference is killed "
... but in absence of any better ideas (and not being 100% clear on what these meant) I figured it was worth a shot.

Any suggestions on alternative approaches?

You can try tracking the condition of the actor's headgear and reverse-engineer the damage from it.

Sounds like a good idea, but unfortunately beyond my scripting talents at the moment...

Yep I think the getHitLocation only returns something useful when the actor is dead... which imo is completely useless.

It is such a shame that GetHitLocation is so rubbish because the things you could do with it if it actually worked properly.... arghhh.

Scripting with Oblivion and FO3 just seems to be the endless search for a bodged workaround due to such limited functions.

You got that right.
This damn helmet/headshot issue is driving me nuts!
Almost enough to encourage me to learn how to script...