What you are seeing is in fact how it works. I am not sure broken is the right term in this timeline, as I believe this is how it worked until much later when it was fixed.
A feared mob or one in melee with player or pet will take full damage from dots.
A mob chasing a player while dotted will take reduced dot damage.
Rooting the mob still leaves it in the chase state until someone steps into melee or it is feared as you stated.
It does seem like a broken mechanic and it was addressed by patches later out of the timeline p99 is in I believe but I may be wrong. The main way to ensure dots do full damage is to jump in to take a hit after you root it and then back off.
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