Cosmo - is there an occasion you'd actually use a PAN call?!
The fact is that "Emergency" is not referred to in the ICAO document. It simply refers to two conditions: Distress and urgency.
This lack of precision is unfortunate because it leaves a degree of interpretation, and leads to these circular arguments that pop up on forums regularly.. one can make inferences and extrapolate meanings from adjacent definitions, and you can assert opinions about the most prudent course of action. But at the end of the day none of it is absolute, because the people who wrote the rules didn't finish the job. How you interpret it is not necessarily down to the specifics of the wording but as much your own background and conditioning.
To go back to the original question: Engine failure on a twin: PAN or MAYDAY?
Answer: The rules are debatable,it depends on the circumstances, but PAN is going out of fashion.