Zaprozhia Oblast is joining this referendum event too now. But, that's even more dubious because they don't even hold Zaprozhia the city yet so presumably they would not hold the majority of the population.
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I don't think their are any issues with moral on either side and I think the moral aspect has been over emphasised in this war by the west in particular. They say that Ukraine will win the war simply because they are defending their homes and somehow that means they will win but history really does not reflect this. So long as soldiers are part of a cohesive and organised unit then they will fight.
It depends on how they decide to escalate. They might simply keep the war the same but start arming and training the militia groups as if they are part of the Russian army and mobilising more men within the region or they might go for a minimal mobilisation of conscripts of the Russian army.