The convoys don't actually generate until it's time to sight them. At that point the u-boats attack with their deck guns.
Yes, the burning ships are easier to destroy. There is a chance they will already be sunk, but you'll know that because you won't be able to lock onto them at all, and they'll show up on the map as sunk.
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“Never do anything you can't take back.”
—Rocky Russo
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