
Then all zerks activated Berzerk (so now they have 300% mental resistance each) and entered those units:

Then all inquisitors tried converting the units the zerks are in:

And none got converted, even after having their mental resistance reduced way below 0, but could be just me being extremely unlucky, so I'll try one more time.

The elephant got converted after reaching around -300% mental resistance, which is expected. So conversion is working in this case.
Now restarting the test but using demoralize instead of conversion. First try:

In the first 6 casts of demoralize on each unit, the siege tower resisted 4 and got demoralized 2 times, the mantlet got demoralized 6 times, the wagon got demoralized 5 times after the first fail, the elephant got demoralized 6 times and the zerk inside the TC resisted all 6 attempts (with 150% mental resist remaining). So it's not considering the 300% mental resistance of the zerks inside those units that are being demoralized, which I think is a bug.