Grizz, when I used straight Lugol's to remove a suspicious mole I also painted an area of healthy skin and a healthy mole. The Lugol's removed the suspicious mole(over a period of about 8 days) and had absolutely no effect whatsoever on the healthy areas(except transdermal Iodine dosing :)). This was on my arm, btw.
OK! That is not to be construed as an across-the-board reco that one use straight Lugol's on the skin. We had quite a bit of experimentation with painting here in the early days and I recall one user reporting that her facial skin peeled. The end results were good, but still not something I would recommend to the faint of heart.
Sooo I agree with you, and disagree with you. The old belief that Iodine "burns" is true, and false.