Yes, but the language implies it has similar strength and girth so it can weild weapons one size larger without penalty. The advantage of having a mechanical character is of course being able to customize parts more easily. If sed character has the powerful build ability it has the necessary strength and girth to weild bigger fists or legs because it would literally be buying or at least crafting new limbs.Powerful build lets the being "use weapons designed for a creature one size larger without penalty." Improved natural Attack is the ability that lets a critter improve the damage dice of its natural attacks. Check the text of the weapon / component to see which the item falls under if any.
Well, by that definition then no one can have permanent reach effects such as inhuman reach or extend reach because they would flopping and dragging his arms around all the time. This of course is absurd, so it ultimately comes down to a matter of weight. He has the raw strength and similar girth to weild it. Besides, as Dandu pointed out, get a sizing enhancement if that is what you are disputing.A warforged is not a true construct so don't merely drop it into that category.
They can't tailor their basic body parts to a different size by replacing components. They have to have the add ons (warforged components).
Which have to "fit" his basic body - so he can't add "large" to "medium" size, the powerful build does not make the creature larger.
It seems like you are trying to give him the effect of a permanent enlarge merely via add ons.