For your question 1, you made a mistake, for theorem 2.1 will imply that $a^nr + b_1 a^{n-1} + ... + b_{n-1} ar + b_n r = 0$, there's an $r$ in front of $b_n$, because $\Phi^0 = \textrm{Id}_M$. From there, do you see how to conlude ?
For the question 2, here you go :
Lemma 1. Let $\rho : A \to B$ be a ring morphism making $B$ an $A$ algebra and $S$ be a multiplicatively closed subset of $A$. Let $C$ be the integral closure of $A$ in $B$. Then (the image of) $S^{-1} C$ is the integral closure of (the image of) $S^{-1}A$ in $S^{-1}B$. One says that localization commutes with integral closure.
Proof. First of all that (the image of) $S^{-1} C$ is integral over $S^{-1}A$ (I drop the image of's from here) is easy. Now let $x\in S^{-1}B$ a root of a monic polynomial $P$ in $S^{-1}A[T]$. Let $s\in S$ be the product of "denominators" of $x$ and coefficients of $P$. Then $sx$ verifies a monic relation over $A$, so that it is in $C$ by definition of $C$, so that $x$ is in $S^{-1}C$. $\square$
Proposition. Let $A$ be a domain. The following are equivalent :
- $A$ is integrally closed ;
- For all $\mathfrak{p}\in\textrm{Spec}(A)$ the localization $A_{\mathfrak{p}}$ is integrally closed ;
- For all $\mathfrak{p}\in\textrm{Spec}(A)$ that is maximal, the localization $A_{\mathfrak{p}}$ is integrally closed.
Proof. As $A$ is a domain, everything (localizations $A_{\mathfrak{p}}$'s included) will take place in $K = \textrm{Frac}(A)$. Then $\textrm{Frac}(A_{\mathfrak{p}}) = K$ for all $\mathfrak{p}\in\textrm{Spec}(A)$, so that the lemma shows that (1) implies (2). No comment one (2) implies (3). Now suppose (3). Note $C$ the integral closure of $A$ in $K$. By the lemma, the morphism (the inclusion) $C\to A$ induces an isomorphism $C_{\mathfrak{p}}\to A_{\mathfrak{p}}$ for $\mathfrak{p}\in\textrm{Spec}(A)$ that is maximal. The conclusion results from the following lemma. $\square$
Lemma 2. Let $\varphi : M\to N$ be an morphisms of $A$-modules. The following are equivalent :
- $\varphi$ is an isomorphism ;
- $\varphi_{\mathfrak{p}} : M_{\mathfrak{p}}\to N_{\mathfrak{p}}$ for all $\mathfrak{p}\in\textrm{Spec}(A)$ ;
- $\varphi_{\mathfrak{p}} : M_{\mathfrak{p}}\to N_{\mathfrak{p}}$ for all $\mathfrak{p}\in\textrm{Spec}(A)$ that is maximal.
Proof. Results immediately from the more general follwoing lemma. $\square.$
Lemma 3. Let $A$ be a ring and $S$ be a multiplicatively closed subset of $A$. Then $M\mapsto S^{-1}M$ is an exact functor.
Proof. $S^{-1} M \simeq M \otimes_A S^{-1} A$ functorialy so that $M\mapsto S^{-1}M$ is already right exact as "tensoring is a right exact functor". To conclude, one just has to show that $M\mapsto S^{-1}M$ sends injective maps to injective maps. So let $\varphi : M\to N$ be injective and let $\frac{m}{s}$ be in the kernel of $S^{-1}\varphi$, which means that $\frac{\varphi(m)}{\varphi(s)} = 0$ in $S^{-1}N$, which means that you can find an $s'\in S$ such that $s'\varphi(m) = 0$, which means $\varphi(s'm) = 0$, and $\varphi$'s injectivity implies that $s'm = 0$, which implies that $\frac{m}{s} = \frac{1}{ss'} s'm = 0$ in $S^{-1} M$. $\square$
Remark. The proposition answers to your question 2.