Blind in King's Bounty, at least since the reboot with the Legend, has always been working more like what most RPG's call "Sleep" (in fact, it works exactly like Sleep (like Bear Hibernation) in Kings Bounty itself, except it doesn't work on Eyeless creatures).
If it were up to me, I'd just rename the spell as "Sleep" and create a new "Blind" spell which would probably disable ranged attacks / abilities instead (basically assuming that the other senses would still allow the target to locate enemies in melee range).
But then again, they've just been rolling with this mechanic since the Legend, and while its confusing, it doesn't really affect the gameplay.
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