What I've always thought was that if an engine runs out without oil/lubricant, then it will eventually either seize up or the super heated gasses and friction will cause the leaking oil to combust. Since we don't have cut fuel lines modeled in the game, I'm going to by pass that. To prevent an engine fire, the player could feather the engine to keep it from over heating; "running in the red" sorta speak. If an engine fire does occur, the player kill the engine all together and make a dive to snuff out the flame (although in my case this would likely fan the fire right to my fuel tank!). I figure this would be a slower burning fire compared to a fuel tank fire, so the player would have a minute or so to act accordingly or risk losing the wing/fuselage all together.
As far as all leaking fluids go (oil, radiator fluid, fuel), shouldn't the affected area stop producing a stream of the fluid similar to how the fuel quits leaking when the damaged tank runs dry?