The co-pilot says that engine number 2 is running away (spinning too fast). Later we see a shot of engine number 1 (on the left of the aircraft) exploding, presumably due to over speed.
The ELT (Emergency Locator Transponder) is in the tail of the aircraft along with the Cockpit Voice Recorder (CVR) and the Flight Data Recorder (FDR). The ELT can send signals from thousands of feet underwater and along with the CVR and DFR are rarely damaged enough to be unusable. It would not have ended up next to one of the engines.
Dave, the pilot that froze, is breathing when Bug kneels beside him.