1. That's what I was thinking, although how it gets stomped and what other consequences accomplish its stomping is where papermario and I are disagreeing.
2. I have no earthly idea. Considering how the Confederates were losing in the West from the beginning and how, by 1865, the Union's Western troops were in South Carolina, they're going to need to do better in that theater at least.
1) Ah. Well, how it'd get stomped is fairly easy, by the 1880s it wasn't really possible to fight a trench warfare-style contest, and assuming the Confederacy keeps its OTL tactics of headlong attacks into superior numbers by misreading how they win the ATL Civil War they make a few charges into Maxim guns and are massacred in carload lots. The end.
2) Eh, the only short-term means (and the CSA *needs* a short-term victory) is to win a Nashville-scale victory in the Eastern theater in 1862. The Confederacy's best chance to do that is probably Second Bull Run followed by a second such victory against McClellan in Pennsylvania, enough that the Anglo-French feel that backing the Confederacy would actually get them something.
Either that or have Grant die from one of his several accidents he survived during the war and without the OTL Irving Morrell analogue the Union's fucked.