Good questions.
Performance is only degraded below ~20% engine condition, getting progressively worse until failure.
Failing to disengage the starters (in a turbine aircraft) should cause any engine damage by itself. Here are all the items that can degrade engine health: Over-Torque, Prop RPM Exceedance, Ng Exceedance, Oil Temperature Exceedance, Engine Fire, and FOD Ingestion.
They will not degrade below 100% if you do everything perfectly, leaving the MTBF to be the reason your engine fails (at 100% health). I consider this to be substantially more realistic than other forms of engine damage simulation that I have seen, since components often fail hours after they leave the factory, which is called "infant mortality".