They'll still cast the buff if it's in their script but they have no valid targets, though.
I'm fairly sure they won't if there's absolutely no more valid targets... (If there is just one guy that can benefit though...)
Probably easiest way to test is boot up Sceleria, reanimate some Longdead, research Thaumaturgy 1 (for communions), and then try to cast Power of the Sepulchre twice. (+4 attack and AP for ALL friendly undead. Needs H4 to cast, but communions do boost priest level.)
That said, only fairly sure, prove me wrong here and I'll endeavor to reread the entire manual again because obviously I'm forgetting a lot of stuff recently...
To Mech#4, the spellcasting AI is usually pretty good. It just doesn't have a plan.
And for your Mindblast question: Yes, it only inflicts one point of HP damage (on average). Paralyze damage is just how long it paralyzes the victim for. Note that when you paralyze an already paralyzed target, the duration of the paralyses will only be the greater of the two durations, but they'll take HP damage equal to half the smaller duration.
Remember that mindblast is still more of a support role than damage, DO NOT rely solely on it.
AlStar, aren't most of the things summoned by Swarm only capable of doing 1 damage MAX? No matter how high their strength becomes?