I believe we talked a little about ISRs last year when your other DS was applying. My DS received an ISR back in 2016. He applied for the regular 4 year national scholarship. His application was flagged for a possible ISR by someone along the way. I believe it was the officer who conducted his interview, since he was contacted about the ISR the day after this interview. This was prior to interviews having to be at an NROTC unit. He met with an enlisted recruiter who worked at the regional recruiting office to sign some additional paperwork, then had an interview with the CO of the regional recruiting command. The CO of the regional command has to personally interview everyone they offer an ISR to. The ISR was offered to him in September. You are correct in the info that each regional CO has a set number of ISRs to award. The CO can award them how they choose, so long as the candidate meets the qualifications. Some COs offer the ISR directly to candidates they have already selected (my DS' experience). Some COs make it a competition and interview a number of candidates before selecting who to offer the ISR. Once the ISR is awarded, the candidate package goes to Pensacola for review, just to be sure all requirements are met, and unit assignment. This took a couple months to complete. DS application was not reviewed by the regular selection boards during this time, because he had already been awarded the ISR.
It sounds like the CO in your region may wait until December to decide how he/she will award the ISRs. I do not believe there is anything that would prevent your DS from submitting his application for the regular scholarship prior to being reviewed for an ISR. If an ISR is awarded to him, his application would just be pulled from that pool after the selection.
Hopefully
@Go Dores! will come along and confirm or correct this, but I am fairly certain of this, based on my DS' own experience and what others have posted of their experiences.
Interestingly enough (at least to me) the CO of the recruiting region who awarded my DS his ISR has been promoted and is now stationed at the same base where my DS will be reporting to his first ship in a couple months.