When a Character enters battle theiron special ability activates. Dominants do not stop this. So in this instance AOTL could kill Ishbibenob but it would not stop Ishbibenob from using his ability to kill legion of angels.
However, I will say that just because you use AOTL to kill an opposing character it doesn't mean you instantly get a lost soul. The defending player still has ways to keep you from getting a lost soul. Dominants like Christian Martyr can kill your hero. They can use a card like burial to kill the last lost soul in their territory so you don't have one to rescue. There are cards like Unknown Nation which could add a human Evil Character to battle. A lost soul is won during a rescue attempt when the hero(s) wins the battle or mutual destruction by the numbers, the hero(s) isn't removed from battle before a lost soul is given, the rescuing side has a lost soul it can rescue, and it is finally rescued when your opponent relinquishes it to you. There are plenty of scenarios where this process is important so I just wanted to clarify.
