I read on this Sobolev space with negative index question that the dirac delta distribution belongs to $H^{-1/2-\epsilon}(\mathbb{R})$. I was trying to figure out why that is the case but it wasn't clear to me. I know that it acts on test functions by $\langle \delta, f\rangle = f(0)$ Although I don't see why the test functions necessarily need to be in $H^{1/2}$.
Finally, I also read that $\delta^2$ is not well defined as a distribution. How would I see this? Is it simply because if we apply $\delta$ to a function once, we get a value in $\mathbb{R}$. But then why not treat $f(0)$ like a constant function that you can then apply $\delta$ to again?
I can see the issue with naively defining $\langle \delta^2,f\rangle = f(0)^2$, because here linearity breaks down. But is there a general proof for why there's no good way to define $\delta^2$?
For the first question, this is due to the fact that $H^{s}(\mathbb{R}^n)$ is continuously embedded in $C^0(\mathbb{R}^n)$ if and only if $s>n/2$ which for $n=1$ gives $s>1/2$.
For the second one, you cannot define consistently a multiplication between distribution, there were a lot of attempts for that in the eighties (see works of JF Colombeau for instance) but no general framework found as far as I know.
Moreover it seems that in your question you are messing between multiplication and composition. You cannot compose $\delta$ by itself obviously because its image space $\mathbb{R}$ is not its domain space (continuous functions).
The natural multiplications of distribution is rather convolution, and it turns out that $\delta$ is the neutral element for this operation, so that $\delta\star\delta=\delta$.