I actually think that the blackness she described was evidence that something about her death and afterlife was actually strange and improper, not just Larian being wrong about the lore. They don't actually follow up on it, which I find a waste and annoying, but that blackness points to something disrupting her soul's proper journey, which is I'm guessing how she was able to be fully resurrected. The way Kethric talks it's clear that Myrkul directly acted to bring her back, and I'd say that even if he's not a full god, he's still a death entity with power that goes beyond even a level 20 cleric, so I don't think him being able to break or bend some rules to fully resurrect Isobel is unbelievable. And regarding the crypt breath thing specifically, I of course can't be certain but I assumed that was just Orin being poetic, since she does talk in a very theatrical, metaphor and simile-laden manner (which I actually really enjoy.)
So I don't think the way things are breaks the fiction all that much, but would making Isobel specificaly undead have been better? I don't think so. I think it would have just made her a more complicated side character. I think if there was more focus on her and her story and character then that idea could be interesting, but as she's presented currently, she doesn't warrant any further twists and turns. She doesn't have a plot, she's herself a plot point in the act 2 story. She doesn't do things, things happen to her. She's got character and is fun to talk to, but once act 2 is over, she really doesn't see any growth, and really she doesn't see any growth in act 2 either. So making her outright undead would just add uneeded complexity in a game that's already got far too much of that as it is.
