1. Yes. However, after 1 round of combat, the SUB can choose to submerge if it is still alive, ending the attack by the FIG (or BOM).
2. NO. The Battleship is offshore. It can only engage in land combat for a single shot and only in the very special case of an amphibious landing. In the example you cite, with Germany counter-attacking Western, the Allied BB is in SZ7, and means NOTHING to the Allied defenders in Western. Battleships are naval units, and are ignored for land combat except in the case where the Battleship is in the same sea zone as the attacker’s transport(s) that are offloading to combat.
Also, DSTs (Destroyers) can only engage in land combat if you have the technology that permits them to fire a support shot like a Battleship. Otherwise DSTs mean NOTHING in land combat.