So what happens in this scenario:

1. Grisbane has 1 hp remaining

2. Goblin archer attacks and does 4 dmg after defense dice are rolled

3. Andira soul reaper class uses spirit link on Grisbane and spends 4 essence

Outcome 1: Grisbane does not get knocked out and heals to 4 hp

Outcome 2: Grisbane does not get knocked out and heals to 1 hp (the 4 essence spent on spirit link negates the 4 damage from the goblin archer attack)

5 hours ago, The MechE said:

3. Andira soul reaper class uses spirit link on Grisbane and spends 4 essence

I think this is the problem. Is this always active? If not, how can soul reper use spitit link without being her turn?

I dunno, just a guess. Wait for the expérts

8 hours ago, leewroy said:

If not, how can soul reper use spitit link without being her turn?

Its triggered when another hero would be knocked out.

Quote

At the start of each encounter, place 4 damage tokens on Essence Harvest.Exhaust this card when another hero within 3 spaces of you would be knocked out. Discard any amount of essence. That hero recovers an equal amount of Heart instead.

I say Outcome 2. When you apply the first point of damage, that would put the damage tokens equal to the current health value, and triggers "would be knocked out" and Spirit Link fires. You then recover 4 damage tokens, then the remaining 3 damage tokens are applied, leaving him at 1 remaining. It doesn't negate the damage, but recovers the existing damage tokens, so any other effects that may have been triggered by the Goblin damaging Grisbane still counts. It did inflict 4 points to him, but Spirit Link prevented the knock out from occurring with its effect "instead".

Edit: Changing my answer to the below

Sure, but damage isn't dealt one at a time sequentially.

-Grisban has 1 health remaining.

-Grisban is attacked and dealt 4 wounds. He suffers 4, but suffering even 1 is enough to trigger KO (Grisban has 0 health remaining).

-Spirit Link triggers in response to the "would be KO," and instead of being KO, he recovers 4 wound (4 health remaining).

That's it. There is neither a point where Grisban has -3 health remaining nor a point where the remaining wound are counted after the initial deal damage step. My opinion would be that Grisban ends up with 4 health remaining.

Oh yeah, actually diving into it a bit more, Grisbane would have 4 health.

From Damage:

Quote

• The total amount of damage a figure can suffer is equal to its Health.
• When a figure's Health is reduced and the number of ≥ tokens on its card equals or exceeds the new Health, that figure is immediately defeated. Damage tokens exceeding its Health are discarded.

From Defeated:

Quote

When a figure has ≥ tokens equal its Health on its card, it is defeated. In this respect, suffering ≥ and reducing a figure's total Health has the same effect.

So the total damage tokens that can be suffered would be 1 from the attack, which would then defeat and trigger the knock out and Spirit Link. Since you cannot suffer damage more than your health, the remaining 3 would have been discarded.

So Spirit Link triggers when the Knock Out would have occurred, and recovers 4 health instead. End result is not knocked out and at 4 health remaining.

Not sure if that's intentional as it pretty much prevents any amount of damage from knocking someone out as long as you its not exhausted and you have 1 token. You basically can negate an attack every turn for 1 xp.

Okay, what about this scenario:

1. Grisbane has a face down tainted card and 1 hp

2. Grisbane takes 12 damage from a goblin archer attack (but only suffers 1 per the discussion above)

3. Andira soup reaper uses spirit link and spends 4 essence

4. Grisbane is not knocked out and heals 4

Outcome 1: Grisbane was defeated so he flips his tainted card face up

Outcome 2: Grisbane does not flip his tainted card face up, because...?

He doesn't, because he wasn't actually knocked out.
He reached 0 HP (=defeated), but Spirit Link prevented him being KOed.

Thus, the OL also doesn't draw a card/threat token, nor does that count toward quest effects involving hero KOs.

You can see similar instances in some quests with unkillable monsters, where once they reach 0 HP, instead of being removed, they recover.