1. Yes that is correct. The determining factor is language context. This is just a proper noun mentioned in passing, as it were, and those French words are not being studied here. Context.
2. This is harder to explain. Even though the French is surrounded by English, the context here is still French. It's easier to see context in the bold French words in the text above because those words are actually being analyzed and studied. But in this sentence I believe the context is still French and the print provides the special typeface. I would use the emphasis and treat this phrase as French--no contractions and use accented letters.