I believe in the manual, it says that the morale check comes before the damage check. If they fail the morale roll, they won't be repelled with damage because they don't attack? Dunno.
The manual doesn't mention mindlessness. It seems like it's an exception to te normal rule. I found this out when I modded the Dragonflies by giving then non-50 morale, and they ddidn't all die.