The first four Shuttle flights had ejection seats for both pilots. If the failure occurs similarly to OTL, I think those seats give the crew a chance of survival. It'd certainly factor into the decision from STS-5 on to delete the ejection seats--which was required since they couldn't fit 4 in the cockpit with the ejection seats as I understand and of course they couldn't put anyone on the mid-deck, limiting crew from 7 to 2.
Hypersonic ejection? I don't think so; the fastest anyone's ever been thrown out of an airplane and survived was at Mach 3 (using the same type of ejection seat, actually). Young and Crippen are dead unless the failure becomes apparent low and slow, so that they're actually in a situation where they can eject without being ripped apart and incinerated simultaneously (say, when they go to lower the landing gear, the right main won't lower or is clearly deformed and useless). In that case, they're quite likely to do fine (well, as fine as one can be after ejecting, anyways).
I don't think NASA would die over this; Reagan was not a great friend to the space program, but by this point I think it had sufficiently powerful political backers and was sufficiently integrated into the national consciousness that it would basically stick around even if Shuttle was canceled outright and some new minimal program started. The difficulty would be the many, many, many payloads being designed for Shuttle which
had to be launched on Shuttle. That would pose a problem, and one that might inspire a more
Challenger than
Columbia (OTL, of course) like approach to the return to flight (ie., trying to correct the problems which had appeared while planning to continue the Shuttle program relatively indefinitely). Naturally, the Air Force and NRO would instantly start pushing for Titan IV, and SLC-6 might not be constructed at all.
However, it's possible would be a bigger push for some "Son of Shuttle" or "Shuttle II" or whatever in the 1980s; less emphasis on the Shuttle attaining "production" capabilities, and instead treating it as an experimental (if useful) vehicle that could eventually be developed into a production vehicle.