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During a showdown, if the shadow track moves below one does the villain instantly win (i.e. town elder in hunting party dies or effect from Shadow's Puppet)?

if so, in a cooperative game does each hero get a fight round or would the game end immediately?

The game would end at the end of that showdown round, that is, after all heroes and the villain have had a chance to fight for that round. If the heroes are able to defeat the villain in that round they win the game, otherwise darkness wins.

State based action. The game would immediately end as it checks for the shadow track position.