The PeP Rank affected the morale state. And morale affects the damage output, so yeah, the PeP Rank has a big inpact on the damage.
We have to find out how the morale changes the value and integrate it into the formula.

We also have to integrate the special damage types which are affected by the gap between the attackers and targets state rank.
http://spellborn.wikia.com/wiki/State_Damage_Types

Let's see If JW will get some helpful details soon.