To answer your first question, substitutionary atonement is a false doctrine. If it was true, we wouldn't even experience physical death, which as you point out, is a consequence of sin, and still exists after Christ's work.
Remember, Scripture describes Christ as a ransom. In antiquity this is something given in exchange for something owed, and does not need to be an exact duplicate of the debt. In other words, Christ doesn't have to go to hell for eternity in order to be a full ransom for mankind. As Mark_Sam pointed out, Christ is also an eternal being of infinite innocence, and in that sense, covers any eternal sin of a temporal human being.
Rather, the perspective I think we must focus is that God sent His only Son because He so loved the world---not because He demanded an exact punishment. Christ's sacrifice is an act of infinite love. If substitutionary atonement was
required, then how can one say God is
merciful when His wrath was supposedly entirely "appeased"?
As for your second question, sin has more consequence than temporal death. For example, when you wrong your neighbor, not only do you sin against God, but your neighbor. There's 2 consequences. And you damage your own soul because sin causes habit (i.e. as Scripture says, he who sins is slave to sin). So there are all kinds of consequences to sin that weaken us and stain our souls. Fortunately, before entering the perfection of heaven, those true children of God will be completely purified by His blood.