Also, I've been thinking I want to have a monster morale option but don't have much direction. Yours looks interesting, but it's a bit unclear...how's it work?
I realized I never answered this, but its funny you ask, because when I originally wrote it I THOUGHT that I had created something that was roughly feature complete. Then a LONG time later, like a year, I was running some playtests of different fights on roll20, and making morale checks came up. What do you know, going back to that section was clear as mud! So, I definitely have it on my list of things to clean up.
The IDEA is actually kinda prototypical, the 1e DMG had a system and in effect this is its spiritual descendant. If NPCs are taking casualties, or facing other situations that are obviously not good for them, then they will need to make a morale check to remain on the field of battle. This is meant to allow for a bit more dynamic situation than the idea that morale is fundamentally reflected by hit points. I agree, you can interpret loss if hit points as a loss of morale, but there are bigger things going on here. If a band of 10 goblins suddenly takes 4 casualties, then the others are likely to reconsider their course of action. I don't really know how you would mechanically represent that as damage, its more of an overall effect. So a magical attack that disheartens opponents might just cause psychic damage as a vs WILL attack. A morale check however is called for whenever certain (admittedly not currently well-defined) conditions come about.
The GM would determine what the morale DV is, using the chart in World and Play's morale section, and then toss a d20 and see what happens. Some, all, or none, of the monsters will fail, and those monsters will flee. They may surrender if flight isn't an option. Note that NPCs might be allies of a PC and fail morale. The PC could then attempt to command them to stop fleeing, effectively rallying them, that would be a Leadership check.
There are 2 other types of related checks, Loyalty, and Obedience. A Loyalty check is called for when an NPC is in a position to commit a betrayal or disloyal act. An Obedience check can be used to determine if an NPC complies with an order or command. They are often practically the same thing, but not always. In both cases this is a situation where a PC is involved, either commanding the NPC or subverting it. I don't personally use dice to make determinations behind the scenes, though you could in some situations where a PC was the employer of the NPC.