Does DR apply to a Phantasmal Killer if the Fort save is made?
If yes, why?
It seems to me it would not since the subject is only taking damage from their mind, the illusion itself is not real.
Phantasmal Killer:
You create a phantasmal image of the most fearsome creature imaginable to the subject simply by forming the fears of the subject's subconscious mind into something that its conscious mind can visualize: this most horrible beast. Only the spell's subject can see the phantasmal killer. You see only a vague shape. The target first gets a Will save to recognize the image as unreal. If that save fails, the phantasm touches the subject, and the subject must succeed on a Fortitude save or die from fear. Even if the Fortitude save is successful, the subject takes 3d6 points of damage.
If the subject of a phantasmal killer attack succeeds in disbelieving and possesses telepathy or is wearing a helm of telepathy, the beast can be turned upon you. You must then disbelieve it or become subject to its deadly fear attack.
Well, not really. But it'll answer your question.
Damage reduction (generally) only applies to physical damage. Magical damage automatically overcomes damage reduction.
(There may be some debate when a spell does slashing, piercing, or bludgeoning damage. Energy damage and untyped damage from spells always bypasses damage reduction, however.)
DR generally doesn't apply to damage from spells unless that spell specifically says it does.
Definitely look at the information on Damage Reduction in the Core Rulebook (starting on page 561). Some excerpts from that section:
The numerical part of a creature’s damage reduction (or DR) is the amount of damage the creature ignores from normal attacks.
Spells, spell-like abilities, and energy attacks (even nonmagical fire) ignore damage reduction.
Close, but DR applies to spells that mention the physical damage types (bludgeoning, slashing, piercing). The text quoted above was inaccurate, and they're fixing it in later printings. That refers to untyped damage.
There's still the question of whether it counts as magical or not.