I always thought that fearful means "one who fears too much" ... Anyway, I'd recommend substituting it with "this unit".Each individual enemy unit engaging the fearful in melee must resist magic or stand frozen in terror, unable to attack, even if swung upon.
E: Okay, Webster says that actually the both meanings are possible. I'd substitute it with "this unit" nevertheless.
P. S.: To keep you informed:in the translations, I decided to tread the way of being a little more specific (in the terms of game mechanics).