Aye, sounds like you have silent running turned on. In silent run mode your crew will not reload torps, do repairs or any other noisy activity. Simply going to a faster engine speed is not enough to take you out of silent run. You actually have to click the "secure from silent running" icon.
As for ships not showing any signs of damage. Sometimes those big merchies can take a lot of damage before they go down. I once had to put four torps into a troop transport. Where you aim your torps at a ship does play a factor. Sometimes hitting them directly amidships where the scope aims when you auto lock is not the best place. Try aiming right under the smoke stack. That should get em right in the engine room.
