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Is accuracy not taken into account?
Yes, it works like a spell.
Is it up to me to decide whether NPCs fight on foot or on animals (for those who have them)?
All who have animals fight on them (NPC charniks don't see it anyway).
Does it last until the end of the battle or until dispelled?
Until the end of the battle or until dispelled by some effect that removes negative effects, whichever happens first.