I have stormed human castle with over forty soldiers, mostly crossbowmans and swordsmans, few children. I have killed one guy in the barrack, and they only talked how I attacked someone. When I talked to them, they spit on me, but no aggression.
I traveled out, stayed outside for hour and returned. When I killed another one, there was still no reaction. But then I slashed the third one and before he died I talked to one of the soldiers.
Suddenly almost all of them turned on me at lethal. I survived, since right now my stats are legendary in all relevant skills and many of them, despite lethal conflict, decided to not chase me. Why? I don't know. I might try to slaughter another castle in near future.
Few times I punched a local lord to the face and in few cases whole court went into brawl, children included. But at other times - even in the same hall - when I sliced someone in half nobody really responded otherwise then talking standard dialogue.
So there is improvement from what I have seen in previous versions, but sometimes it works and sometimes it doesn't. And I am not sure if there is way to nudge them into full blown skirmish.
EDIT
I went into dungeons, where I found some humans who said that they were soldiers, and just in rooms nearby some goblins who made criminal organization. When I attakced chieftiess of the gang, six goblins went lethal on me, including one in the room next door, who couldn't saw anything. But not all gang members went lethal. And to make things even more bitter, when I started to kill soldiers there were no such comradship. I think one soldier went lethal, when I killed another warrior next to him. The rest didn't care.
So I guess there is still long way to go before reasonable morale and aggresion system.
EDIT 2
So it seems that killing one person, giving them some time to spit and froth at sound of your name, then returning and attacking someone almost gives you the reasonable effect. Now in bandit fort with 69 denizens, I have done what I described and 35 went lethal. Those who didn't react at first call either waited for their doom, or reacted when another passive next to them was slain.
Another oddity was in changing lethal to no quarter. At some point one of the first batch yielded. I killed him and about 1/3 of the lethal group changed their status to no quarter, while the rest stayed at lethal. Since the target that started skirmish was called "master" and this yielding soldier was just spearman, maybe it has to do with histfigs' relationships?
When you attack someone at the first coming to place most of NPC are not yet histfigs, with no memory of anything. So no reaction. But as they talk between themselves how "it is terrifying", they start to make some connections and only then they react with violence when killing their one-hour buddies. I don't know enough about NPC memory, so anyone with more more knack at those things will be apreciated here.