Fallout damage can be taken as either mental or physical stress (but not both at the same time).
Physical backlash physical stress is NOT subject to stress reduction due to physical toughness powers. The reason for this is that:
a) It comes from inside you, and there's a lot of support in various ethnicities' lore about killing supernatural creatures with weapons made of their kind.
b) The Mental Toughness power specifies that it protects against mental attacks, and the damage from backlash is directly from the mind of the magic user.
c) The addidtional stress boxes that come from the physical toughness powers give the magic-user an extra pool for backlash stress the same way the mental toughness powers do.