Yes, but because it's simply an anecdote, we never know the nature of the malfunction. It could simply be that the UT malfunctions in accurately translating the xenon speech.
I don't think so. Neelix specifically states to my memory that they were in the middle of negotiations (i.e. the translator had been fully functional previously in the conversation.)
If I really cared, I'd go find my Voyager specs and technical manual (SHUT UP) and see if I couldn't find information on the Telaxian Talaxian translation systems. But that goes WAY beyond the scope of a thread about bad accents in television.
To be fair, though, those spec sheets are awesome.
FTFY. Wouldn't normally go all hardcore nerd on you, but somehow I figured it'd mean something different to you than the average person.
Honestly though, getting back on off-topic, I think trying to make rational sense out of the UTs is a harder task than trying to make sense out of the contradictions in the Bible. It clearly was never meant to be anything more than a hand-waiving for the question of "but how come they all speak English?" and they never intended for it to make any more sense than that. Well, at least until it started finding its way into plots.