When I go topside with the Captain to view the enemy ships, the game ends shortly after he takes back the binoculars. It tells me the Blackhawk was torpedoed by the Russian ships. What am I doing wrong??

I'm having the same exact problem. Were you ever able to fix it?

Yes... though it's been a while and I can't remember. I think it involved playing the preceding submarine sequence again, quickly. I think the game is on an internal clock or something, and you have to do everything in the amount of time it wants. I wish I could remember exactly.

A year or so ago, I did a step by step walk through as I replayed the game.
http://sierrahelp.com/forums/viewtopic.php?p=54227#p54227

I figured it out after trying a few things. The version of SCUMMVM installed with the game is the reason why. Timing was a big thing with Sierra games back when CPUs were slow. You need to upgrade the version of SCUMMVM to the latest one (2.6.1. at this time). It has the fix that prevents this from happening. The 2.0.0 version GOG includes has the bug. Just download the new version, unzip those files, and copy them to the SCUMMVM folder inside of the game folder. I was able to leisurely read the conversation with the captain and get to the driver seat without any issues.