Q1: No. The SELECT is the victim because it had only read data, therefore the transaction has a lower cost associated with it so is chosen as the victim.
Here is how this particular deadlock problem actually occurred and how it was actually resolved. This is a fairly active database with 130K transactions occurring daily. The indices in the tables in this database were originally clustered.
The client requested us to make the indices nonclustered. As soon as we did, the deadlocking began. When we reestablished the indices as clustered, the deadlocking stopped.
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