Is someone who is @mentioned in a direct message conversation they are not in still notified?

I've just tested this. Private messages are only visible to the people in the private conversation - if someone is @mentioned and they are not in the conversation, they will not see the message and will not be able to view other messages in the conversation.

That direct messages using @mention do not send notifications is also stated at the bottom of Slack's "Mention a member" documentation:

Tip: Using an @mention in a direct message with any member will not trigger a notification.

Additionally, since you cannot share messages from private conversations, the only way to share a message with someone outside of the conversation is to copy-paste it into a separate message to them.

So no, person C would not see the chat message with the @mention or any of the other messages in the conversation.