I've had moments in the overworld where I immediately lose partial avatarhood in Valor if I held down an arrow button too much before being attacked, and it buffered-over into the combat field and I unintentionally "flee" from battle.

But I don't seem to ever lose an eighth within dungeons. I can run away from monsters and nothing happens. I can kill innocent animals left and right (bats, rats, spiders, etc) and I don't get dinged on virtues.

Am I correct in that what you do within dungeons has no effect on your virtuosity whatsoever? Or is it still possible in some specific circumstances?

You can still lose an eighth in a dungeon but not from running away from monsters in rooms. However if you run away from monsters you encounter in corridors you can still lose an eighth.

(I bet he did this because there can be monsters in rooms that you can't reach to kill.)