ToME: the Tales of Maj'Eyal

The new chant of fortress appears to be very good after reading it's description but i am still unsure how exactly it is calculated.
First of all, by saying everything that it 2 tiles or more away from you does that mean every enemy that is not in direct melee contact with your character?
And second, how exactly is the damage reduction applied? It says reduces the damage you recieve from them by X%, does this mean it effectively increases your all resist against such enemys by X%, and what if your all resist is already capped at 70%?
Or are the X% substracted from the enemies all damage? Or are the X% reduction maybe calculated in a separate step and actually reduce the damage you recieve by said percentage after resistance and everything else has already been factored in?

Hum, looks like the tooltip's wrong, and it starts at distance 3:The actual damage reduction is completely separate from everything else and is applied pretty much last on the list - so yeah, the last thing you said.