One BVE route, I think it was the old Southern Region one for BVE2, did have a signal failure, and at the signal there was a message to pass the signal at danger and proceed with caution to examine the line.
As for stopping at signals, as long as the front of the train isn't past the signal and the back of the train is clear of the overlap of the previous signal, it doesn't matter where you stop (unless of cource their is a station, in which case you need to stop at the correct position, or where the train is about as long as the signal section). Particularly on uphill gradients it's not uncommon for drivers to stop quite a distance from the signal, rarther than applying power to draw up to it, especially in areas where CSR (Cab Secure Radio) means that they don't have to walk to the Signal Post Telephone to phone the signalman. Oviously it's also useful to be able to see the signal to know when it clears, so particularly where signals are on overhead gantries drivers will also tend to stop a fair way back, wheras in other places where they are at eye level that might draw right up.