I'm not sure if it's supposed to or not on live, but IMO it shouldn't. You're no longer iksar, you're undead. It's like Neverwinter Night's undead shifter feat (for anyone who knows that game and class). It's Risen Lord shape came the perks and penalties associated with undead, including damage reduction and being highly vulnerable to clerics.
Skeleton form in EQ is not an illusion, but a shapeshift. I don't know if EQ's devs implemented it that way, as I never played an iksar necro.
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