"Shroud of Oblivion

Defense: Fortitude

Effect: This spell can only be cast upon dead body or a Vanquished foe; if successful, the Target is
reduced to nothing but dust, leaving any equipment untouched."

Considering who gets this spell (deathbringers of Neroth) and that it has a defense, I assume that this can be used to destroy an active undead? Is that correct? If it is it seems like the text is oddly oblique to the fact.

Gets a bit messy. An undead is just that, an 'undead body'.

You would need to Vanquish the undead first (stamina or wounds) to give them their final rest.

An undead is not necessarily dead. I do agree that a clarification should be put on this.

To quote a death bringer I know "Nothing to see here. Move along."

Exactly!

The way I see it, the target basically can't fight back under its own means. The spell mentions nothing about undead specifically, so the "undead" trait means nothing with this spell. The undead must be vanquished or dead.

It is a body disposal spell, probably to prevent reanimation.

But why give it a fortitude defense to resist then? An inanimate body wouldn't get that, only an animate but dead (i.e. undead) body would qualify for the spell, and yet get a fortitude defense, right?

My reading is that the Fortitude defense applies to any Vanquished foe (dead is dead so I don't think dead foes have a Fortitude defense). In order to kill a Vanquished foe with this spell, you need to beat their Fortitude.