In my experience, contractors will typically not deduct overhead and profit from a deductive change order. I have never had a problem with this for the reason bimr states, that the contractor has extra work associated with processing the deductive change order. I have not had an owner complain about it, perhaps because they are happy just to get a deductive change order.
I had one in particular, on a very fast paced design-bid-build project, where I redesigned the drainage system and saved about $200,000. The subcontractor, who I had a pretty good relationship with, called me up complaining about the significant changes and I told them to put a charge on the deductive change order for a reasonable rate and time for repricing. They charged about $500, if I remember correctly, which was pretty fair.