Do the Isolation Transformers protect system

Isolation transformers can do some surge protection. As the input V increases, there will be more and more magnetic flux in the iron until the iron saturate at which point the coupling between input and output gets very poor and the output will no longer track the input V.

An isolation transformer itself won't.There are circuits that can be used with it to help out.Every protection device has its limits though.

I've read up to 8:1 momentary surge reduction for iso's. Similar to a RC snubber. For example; if there's a 80V spike up to 200V for less than a few cycles (cycle =1/60 second), it could be reduced to 130V. Not a lot of testing has been done for this since it's not the intended purpose and limitations of testing gear speed but transformers can reduce some surge, not eliminate it. If you want secure protection against lightning strikes and municipal transformer blowouts, look elsewhere. Many surge protectors use MOV's which can only protect once.

It does not regulate power like a ferroresonant transformer such as a Sola MCR or Stabiline but those can be noisey. Regulation, done properly, is expensive.

An isolation transformer by itself only isolates the connected equipment from ground.

If the voltage increases (or decreases) on the supply side of the transformer, the output side of the coil also goes up or down. So, if a 120 volt AC supply surges to 150 volts, that will be passed through the windings and 150 volts will appear on the output side of the coil. Same thing with a voltage drop. In the absence of any other circuitry besides the transformer, a rise or drop in input voltage will have a mirrored increase or drop in output voltage.

There is a probably a natural upper limit to the voltage that the transformer will pass without burning itself out, but you're well beyond any safe voltage for connected equipment at this point.

A transformer also won't pass DC, but the presence of sufficient DC on the input can overheat the transformer and it will also decrease its efficiency and output capacity.

A transformer can also offer a reduction in RFI on an AC line since the ability of a transformer designed for wall current to pass high frequencies falls off as frequency increases. But that's a probably a noise issue more than a safety one.

Surge protection strips are a different animal. They have an active component that senses voltage irregularities and will interrupt the circuit in order to prevent damage.

Now, that's not to say that a device can't contain circuits other than just the isolation transformer. You'll need to carefully look at the manufacturer's specifications to see what the capabilities are.

Isolation Transformers protect just like a surge protection strip would as long as you don't have any device in the system hooked to a cable feed or phone line.

All system can still be hit if the lightning is so close that the static electricity in the air travels over the interconnects and speaker wire. (I had a customer get his entire system damaged while it was unplugged.