RobinK:
From Robert's Rules of Poker (RRoP) v11, section 3, Irregularities, Sub 16:
"16. If the dealer fails to burn a card or burns more than one card, the error should be corrected if discovered before betting action has started for that round. Once action has been taken on a boardcard, the card must stand. Whether the error is able to be corrected or not, subsequent cards dealt should be those that would have come if no error had occurred. For example, if two cards were burned, one of the cards should be put back on the deck and used for the burncard on the next round. On the last round, if there was no betting because a player was all-in, the error should be corrected if discovered before the pot has been awarded, provided the deck stub, boardcards, and burncards are all sufficiently intact to determine the proper replacement card."
The MOST IMPORTANT part of the above statement, in my opinion and the part that can be used as a basis for rulings on many different dealing errors is: "Whether the error is able to be corrected or not, subsequent cards dealt should be those that would have come if no error had occurred."
So, my answers to your specific questions would be:
#1 - Absolutely, your ruling is 100% correct.
#2 - See above, the deck is NOT RESHUFFLED, the correct resolution is to burn the proper card and place the proper flop.
Since this is an 'all in' situation involving only two players, there can be no negative effect of making the correction as there is no more action to be taken.
Hope this helps!!