To me it sounds as if the AI is relatively smart.
Keep in mind that Tashas Hideous Laughter is a quite powerful cc with the drawback that it can break when the target takes damage. So the main uses of that spell are either to keep an enemy out of the fight untill you dealt with his allies or to buy yourself time to run past an enemy. In both those situations you don't want friendly npcs to break the spell.
This is a good point - it's entirely possible that break-on-damage CC is treated as a 'do not target' point for the AI.
I agree also. In this particular case, it is not a good tactic as there is only one dangerous adversary, so the Illithid should eat Zhalk's brain brain or finish it otherwise while it is incapacitated. But it could make sense as an AI tactical rule in general.
