Some people claim that if you set a minimum power of 15 in your engrave settings all of your masking will be vaporized. I think others claim the minimum power is 10. I don’t engrave a lot. A plastic razor blade is a good tool for scraping off masking.
If the wood is already finished it will be more resistant to picking up smoke stains, but any picked up can’t be sanded off. You’ll need to use some other cleaner if you don’t use masking.
I’d be cautious using a finishing product over the top of wood that already has a finish. There are plenty of sources for thin hardwoods (you’ll have to sand and finish).
If you leave the masking on some finer details can be lost unless you bump the power up slightly - cleaning the residue off can be achieved a number of ways. Personally I use alcohol hand sanitizer and a toothbrush
Taking the masking off will leave you with smoke residue - which some folks like because it gives things an aged look - if you don’t like that I still recommend the hand sanitizer and a toothbrush
So the answer is - it depends!
You can buy spray or brush sealers/varnishes to put over the engraved areas, some folks like Mod Podge or Deck Sealer but once again it’s a personal preference, and testing is the only way to be sure which one you like