Ok, before I pull out my hair I also had a friend take a look at this and we both got the exact same results.   If anyone has the time to try this here's the problem I've been having.

I bring in the M4.cr2 (the one without any morphs injected).   Bring in a conforming item usually something that is close to the skin and not too bulky and conform.   There is pokethrough on the chest and in some cases on the arms.   I've tried an array of clothing items from RT productions to Luthbel's to Uzilite.   The pokethrough varies according to the style of the clothing but it's still there.

I tried Poser Pro 2010 as well and get the same pokethrough although I'm certain I never had that problem in the past.   Both PP2012 and PP2010 are updated to their latest service releases respectively.  I've only had this appear in the last month or so and have no idea what's causing it.

Next I tried Poser 7.   The clothes conformed just fine and I saved the .pz3 and reopened it in both Poser 2010 and 2012 where it looks perfect with no pokethrough at all.   At this point I gave up trying to figure it out.

Seeing as a friend who also has P7 and PP2012 already tried this out for me and got the same results I can only conclude that there is some kind of bug in PP2010 and PP2012 where M4 and his conformers are concerned.   But since I have never seen this mentioned in any of the forums it begs the question:  Is anyone rendering clothed M4s in PP2012?

Oh, and yes I've unchecked 'use external binary morph targets'.