That's how it should be, though I'd reckon the round should still go on in 3) IF Khuzait is contesting the flag at that time.
It's safe to say that it's not working as intended and this incident should be looked at accordingly.
Either overtime is discarded and Vlandia wins the round by simply having more morale at the end of the round.
Or
Khuzait is awarded the win for that round for having defeated the enemy within overtime.
Personally overtime, if it works properly, makes for more exciting matches, so I'd go with the second option. It'd also allow for those last second flag contests to be meaningful even at the very late stage of a round.
@NIN3 Is there a way to have the game prioritise elimination over morale conditions? That could avoid scenarios like these, where the winning side is essentially punished for killing the last opponent too quickly. Then again, since the issue had officially been fixed, I reckon the team has got something in place to take care of that problem anyway. When it's not causing any crashes that is.