Could be an interesting feature but do we want the AI to be able to do this as well? It would affect gameplay because setting a plane on fire is usually enough for a kill. But I do find the impossibility of stopping an engine fire not very logical, even if an oil tank or line is hit, since oil burns slower and less violent than fuel.
In real life, using the fuel cut-off valve would be the way to go. In case of an engine fire you want the carburettor and the inlet manifold/supercharger to be empty, so leave the mags on so the engine can burn what's left.
Switching the mags off means a lot of fuel in a perfect mix leaves the exhaust pipes, since the engine continues as an air pump until completely stalled, worsening the problem. And in case of the P38/B24/B17 you don't want your turbocharger exploding as well.
I found this movie after writing the stuff, seems not far from reality.