var iframeInner = jQuery(iframe).find('iframe').contents();
var iframeContent = jQuery(iframeInner).contents().find('#element');
iframeInner contains elements from
<div id="element">other markup goes here</div>
and iframeContent will find for elements which are inside of
<div id="element">other markup goes here</div>
(find doesn't search on current element) that's why it is returning null.