My understanding is the "Mac" side of A/UX still had no memory protection. It still had all the stability problems plaguing System 7, unlike modern macOS / OS/X
This is true and was not easily fixable with existing applications. They added a kernel supporting memory protection in the move to PowerPC but it wasn't until Carbon that apps really benefited from that. Carbon was a transitional API between classic MacOS and OS X that made it feasible to port apps to run on both, but conceivably they could have done something similar without the switch to Darwin.
This is correct, but as a practical matter, since the Finder was just another process on A/UX everything else (including X clients, if any) could keep running. Unfortunately this would kill all your Mac apps, including your X server if you were running it through MacX.