Borh of these creatures have the breath ability, and both have pierce. How does pierce apply when the weapon is breath? Do they have an alternative attack that would bring pierce into play?

Does the bolt ability ignore armor, or does armor reduce the amount of damage?

Pierce applies exactly the same to a Breath attack as to any attack. Breath or Bolt just change the spaces affected, not what happens to figures in those spaces.

leoj said:

Pierce X applies to template attacks just like everything else; each target affected by the attack has his effective armor value reduced by X when calculating wounds.

That said, dragons and hellhounds (and any creature with Breath - not sure about other templates) also has the option of not using the template, and simply making a "regular" melee attack against a single space. This attack uses all the same rules, but ignores the Breath keyword on the card. This was introduced to counteract the hero with grapple who pins a dragon diagonally and thus can't be hit by it's breath attack.

leoj said:

Bolt is just another template, with a different shape. It does not confer any ability to ignore armor, wholly or in part. If the monster (or hero weapon) that grants Bolt also grants something like Pierce, then that's fine and dandy. Otherwise, the only thing Bolt does is hit multiple targets as defined by it's template.

Steve-O said:

If they forgo the breath template they are still making a ranged attack. They do not have the option of making a melee attack.