take two head bolts and tighten one with an extension and one with a short socket to 100 foot pounds.Now measure the bolt that was tightened with the extension with the short socket and see what happens.

Looking at the original question, I think the confusion is actually in the "extension" part. Some if not all of the math formula is using the length of the torque wrench in there. This type of formula (which I just can't agree with) comes from the internet formula for an "extension" that moves the square of the torque wrench away from the center of the bolt, like a crows foot would. That is why, I think, this added lever has reduced the torque required. But this formula has been incorrectly stuck in there using a height "extension".
Now, as for the height extension abosorbing torque? Sure does, you can buy these extensions that limit the torque applied to head bolts. Put on one of these extensions and they just twist when the correct torque is reached, eh? But for a short stout 4" extension I think you can pretty much forget about it.