On the often defensive result of 1 or 2 for Hit Resolution, it’s a chance for a clean break/evade without harm. The opponent might not flee, but this is an opportunity. Or, they might choose to focus elsewhere. You should keep the narrative in mind. The Mare, for example, had good reason to retreat.

Your other two notes are correct; I have annotated the text in Moments 4 and 5 to clear this up.

To summarize, my understanding is this:

1) PCs generally get 1 chance to act on their own every Moment, plus they essentially get a free roll of their own defense for every attack that comes at them.

2) When PCs attack, if they succeed (anything but a 1-2) they generally inflict 1 Hit, plus any special effects that may apply for weaponry, and if they falter (1-2) GM rolls on the target’s Hit Resolution table (1d8) to see what happens to the PC.

3) When PCs defend, if they succeed (anything but a 1-2) they generally just avoid taking any effect, but if they falter (1-2) GM rolls on the attacker’s Hit Resolution table (1d6+2) to see what happens to the PC.

Is that all correct?

If so, my one remaining point of confusion[?] is that many of the Hit Resolution tables seem to have a rather bad result for the opponent (run away, etc.), but it seems odd that that result is only possible when the PC *fails*. Am I missing something?

Re: the specifics of your example combat, it really did clear things up almost completely in my eyes. I had just a couple points that could use a small clarification:

Moment 4 – I assume Isabel’s attack succeeded here, but it was the Armor roll of 1-2 that prevented a hit to the Mare? Otherwise, Isabel would have gotten a Hit Resolution against her, right?

Moment 5 – I assume Julian faltered on his attack (1-2) which allowed the Mare’s Hit Resolution to be rolled?