1. Can the OP edit the posters' posts in his thread too?
No way.
2. Are moderators able to see the posts deleted(/edited?) by the OP like they can see in normal threads?
No, we don't see deleted posts. If we want to "delete" something but keep it visible to us or other mods for whatever reason we have a trash can forum available to us we can move it to.
Perhaps that would be an easier solution than notifications or marking deleted posts, a read only subforum where all user deleted posts are moved, available for all to read.