The text of the spell is unclear about whether the healing replaces all damage or just the amount of damage converted to healing. The spell converts the first 15...67 damage from the next damage source into healing, with no effect on further damage. For example, if a monk with 16 ranks of Protection Prayers casts Reversal of Fortune on himself and a foe with 16 ranks of Fire MagicFireball on him, he will be healed for 84 health and take 35 damage, resulting in a net gain of 49 health, while an attack with over 168 damage such as Dark Chain Lightning would result in a net loss of health.
If damage is dealt in separate packets, such as from Deathly Chill, Reversal of Fortune will only negate damage from the first packet.
If multiple sources of damage are dealt simultaneously, Reversal of Fortune appears to act upon the largest source of damage. This can be observed when a player with the enchantments Retribution and Shield of Judgment is attacked by an enemy enchanted by Reversal of Fortune; regardless of the order in which Retribution and Shield of Judgment are cast, Reversal of Fortune will always act upon Shield of Judgment.
This spell is better used as a healing skill with the ability to negate damage than as a spell used to protect someone at full health. It is far more effective used on someone who has already lost health.