It is terrible for the family and the poor little boy 
However, as a midwife I have been present at lots of forceps deliveries most of them cause some bruising to the baby but nothing that lasts more than a few days. I have of course been at more traumatic ones where there has been more bruising and trauma to the mother however these are much less common.
In most circumstances where forceps are used it is by far the safest for the mother and baby. If a section is done when the baby is that low in the pelvis the risks to the mother of having serious bladder damage is high, as is the risk of severe bleeding. In fact a friend of mine had to have a hysterectomy after a section done when she was fully dilated as it was the only way to stop the bleeding. If the babies head is low down and a section is needed the midwife sometimes has to put her hand in the vagina to push the baby's head back up which can sometimes be very difficult and risky for the baby.
When I read birthplans that suggest the mother will not consent to forceps or ventouse but will go for a section instead I just feel that usually these people don't really understand what they are asking. As well as being potentially riskier to the mother and baby it takes much longer to do a section which could endanger the baby further, the recovery is worse for the mother (usually) and future pregnancies and births are more complex. Most women who have a forceps delivery first time around will go on to have a normal birth second time around.
For a forceps delivery that is expected to be uncomplicated a consent form is not usually signed, verbal consent should be obtained. However one should be signed if the mother is transferred to theatre as they are expecting it to be potentially more difficult such as if the head is high or in a difficult postition