Well $error wont catch "<command> Unknown command" and evaluating $2- as a command is very dangerous even if it is for a ulevel of 1500.
However you seem to be right smile
Code:
alias testerror {
  echo -a $or()
  :error
  echo -a this: $error  FAILED
  echo $iif(1,1,2) $error ERROR FAILED
  echo -a $error ALSO FAILED
}

as suppose to
Code:
alias testerror {
  echo -a $or()
  :error
  echo -a $error FAILED
  ;echo $iif(1,1,2) $error ERROR FAILED
  echo -a $error ALSO FAILED
}


I have no clue why it would do such a thing because no error in the :error section seems to retrigger the :error handling.

You could save $error into a %error variable prior to using $error. However this wont stop from /reseterror to be triggered and therefor not propagate backwards to any calling aliases which might be the behaviour you want.

$maybe