This article will give you a lot of insight into the battle itself. Unfortunately it doesn't address your questions. I just thought you might find it interesting.
http://www.navweaps.com/index_inro/INRO_Bismarck_p1.htm
As to your first question, I would imagine it's hard to tell what's going on aboard a burning wreck, even at a range of less than 4000 yards. I feel fairly certain that they were more intent on making sure the ship could not be salvaged by her owners than with any concern for her crew. And they had lost well over a thousand of their own to
Bismarck's guns just a few days earlier.
As for abandoning rescue efforts, all I can say is that in combat one does not always think clearly. Part of the World War One battle of Jutland was decided by 'periscope' sightings, with the British battlefleet turning away from percieved dangers. Sad as it may be, it's what happens when people get excited.