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I don't beleive the false images disappear if they are "hit", but they all disappear if the actual caster is ever hit.
just to add to what Zen said: the number of mirror images is 1+2*Air, so a really high air caster can be a real ***** to take down 
otoh, something w/ mirror image but no air paths (like a normal Van) will only have one image.
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but it *looks* like CMoD gives you Free Mirror Image
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perhaps it did at one point. Zen's MIQR indicates that it does, but It hasn't done anything when i've put it on an air caster.
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From what I've seen myself and heard from others the CMoD only has a better than normal defense - there's no "displacement" spell effect like mirror images or anything.
Also: I thought the awe check was essentially a morale check, with the awe modifier used as a negative modifier to the morale check. It's also worth mentioning that awe seems to only effect melee attacks; I don't think missile or spell caster units are affected by awe on their target.