beerguy55

No..."passing the runner" is a bit of a misnomer.  Think of it more as a state than an act.  If the trailing runner at any point finds himself beyond the lead runner,  (or conversely, the lead runner finds himself behind the trailing runner) the (should have been) trailing runner is out.

It's not only merely dead
It's really most sincerely dead

Being a girl on base I'm gonna take a "flier" here and go with softball - sure, girls play baseball....99% of the time if a girl is playing a bat sport it's softball.  If I'm wrong I'm wrong.
This may differ in other softball rule sets - NFHS, USSSA, NCAA, LL, Softball Canada, etc - but here is the official international softball rule:
Section 9: The runner is out:
m. When he interferes with a fielder attempting to field a fair-batted ball, regardless of whether the ball has first been touched by another fielder, including the pitcher, or intentionally interferes with a thrown ball. 
 
Assuming the rule set still follows this rule sounds like they got it right.

a. yes
b. no
While the force is on (the batter hit a fair ball and is now a runner), the runner on first is not safe on that bag.  Once the batter is retired, the runner is now entitled to that base and is safe if standing on it.   

Dead ball, strike, runners return - batter out if strike three.

Nothing.  Run scores.  Batter returns to plate to complete at bat.  There was only two strikes.  The catcher should know better than to try to get the batter at first base.