The description for the spell mentions a mildly suffocating sleep (or something along those lines) however testing the spell on enemies shows no damage done/being done. So is it meant to be doing damage and bugged, or is the flavour text entirely flavour?
The XML does give it damage, something like 1 asphyxiative or something. I think it's always resisted down to 0 damage though.
It does. haven't looked at XML but according to wiki http://www.dredmorwiki.com/wiki/Psionics Narcosomatic Induction: Puts a single monster to sleep and deals Blasting Damage = ( 1 + 0.3 x Magic Power ).