I can confirm that Physical Mitigation works as intended.

I did some tests (solo) in Battle For Erebor lvl 100, T1 and T2. I tracked "Melee High" damage for normal and critical hits (has no range, same damage for both trolls and I always made sure I had >50% critical defence) with different gear to alter my physical mitigation.

Here's what I got :

Tables are :

I bolded "regions" were physical mitigation has no influence on damage.

It can be noted that if you use the formula

Code:

dmg = base_dmg*(1-phys_mit/100)

were the phys_mit is in percentage and calculated thanks to

this page to estimate the attack base damage in T1, all "points" give a consistant base damage value bewteen 37025.6 and 37027.5.

One can also see that the cap is reached for physical mitigation rating between 16543 and 16671, in accordance with expected value of 16658

For T2, the graph makes you think that the trolls actually have armour (or physical) penetration, not as a percentage but a flat value, which here would be approximately 6750. This is because the incoming damage is fixed for all physical mitigation below 6699, and it only changes for the 6770 point so the "turning point" must be between those two.

Using this vale to calculate the effective mitigation (that simply means substrating 6750 to your rating before using the formula in the previous link), calculated attack base damage is between 92234.5 and 92619.6 while the exact value should be 92568. We'll assume the range is due to rounding errors.

With this armour reduction, you should reach mitigation cap at approximately 23408 physical mitigation. The table show it happens between 24904 and 23021, which is consistent.

Now, it is yet to be determined whether the trolls armour penetration is specific to this attack or not and whether all T2 mobs have armour penetration or not. Trying this on Ruined City's first pack of mobs would be nice : different mobs and different cluster would be interesting.