Jain Fairwood has ability which can tranform all (or some) damage into fatigue.

Question is:

If Jane transform all inflicted damage to fatigue does this cancel any conditions that could be placed on her during attack?

For example, if Cave Spider hit her for 1 damage and a poison and she transform that damage to fatigue. Does poison still applied or not? And if it's not can Overlord change surge implement to damage instead poison?

Conditions are applied when damage is dealt. Jane's Hero ability allows her to suffer fatigue when damage is suffered which happens only after damage is dealt and conditions are applied. Thus, Jaime's Hero ability cannot prevent conditions.

Regardless, the use of surges cannot be changed as soon this step in the attack sequence is resolved.