1 - because there is already an engine failure QRH checklist, and is for use when the engine has "flamed out" without any evidence of damage. When it comes to identifying whether you have a flame out or severe damage you have to look beyond the "eng fail" alert. This alert appears to simply alert the crew that the engine has "wound down" (N2 below 50% and eng start lever at idle) not why.
2 - close the isolation valve to prevent it opening when you switch off the Pack related to the engine that has had the trouble. If you don't switch it to closed it will open when you turn the pack off.