Yes (to a point) to the first and ABSOLUTELY yes to the second. USNA will almost certainly request the second semester transcript. If the candidate has dropped out of college, that could lead to USNA rescinding the appointment. Seriously. If someone can't stay focused enough to stay in school, how will he /she ever stay focused enough to get through USNA and stay focused when in the Fleet?
As for grades . . . if a student has been earning As and Bs in h.s. and first semester and the second semester grades are Bs and Cs (mostly Bs) . . . not great, but it happens. If final grades are mostly Cs, Ds, or worse . . . that will be noticed. How much of an effect will depend on how bad the grades are. Per the above, USNA doesn't want slackers -- they want people who push hard and push to the end, even when it may not "count" or be particularly important.
DS needs to think about himself and his future. What type of person does he want to be and how will that person stand up to what the military expects of him? How will he motivate others when he can't motivate himself?