It frightens not only the enemy you crit against but all nearby enemies. It is already quite strong because every hit against a sleeping target from the close up is an auto crit, same works for knocked out npcs. It is already quite good depending on the setup. Also warlocks can shoot 2 projectiles/action with EB starting from level 5 and it raises the proc chance.
Yes, but I find whenever I do crit, regardless of whether they're asleep, or just a real crit, it usually just kills the enemy. What's the range of "nearby"? I haven't seen any enemies be close enough for them to be feared as well.
I don't know, maybe it gets better at level 5, but to me it just seems to never happen. The few times I do crit, it just kills them.