No they don't, signatures apply to the whole transaction but with the other inputs set to 0 see
https://en.bitcoin.it/wiki/OP_CHECKSIGAs mentioned in another thread, transaction signing is weird, complicated and needs updating.
What is the process that Bob uses to break the system?
Bob wants to spend Bob.Payout
He has a signed version of Bob.Payout input 0, signed by Alice.
He can add his own signature to that, and input zero is signed.
Alice's signature refers to the entire transaction except the input scripts. It DOES include the tx-id and index number.
Bob cannot change what input 1 refers to. He has to sign Alice.Bail.In:1. That requires he reveals x.