Regarding Quachil Uttaus attack:

"Quachil Uttaus touches the first player, who ages to dust and blows away in the wind. The first player is devoured ."

I played AH with 2 investigators using this Ancient One. One investigator obviously got eliminated from the game after the first round of combat. Now does this mean that after the second round, my last investigator gets devoured? If so, then this is completely ridiculous. You might as well forfeit the game if this AO awakens!! I'm beginning to think that you cannot play Arkham Horror whatsoever with 2 players. Probably at least four will need to play this game if you are to have any sense of enjoyment out of it.

Nah, with 2p is rather on the easy side. Just gear up for final battle: get a couple of attack cancellers, and a huge load of clues, and possibly a shotgun so that each 6 counts as two successes, bless yourself and you're able to nuke everything but Azathoth (for obvious reasons). Additionally, final battle must be near to impossible, otherwise people will simply metagame, ignoring seals on the board and go for the final kill every time they play

That still doesn't answer my specific question about Quachil's attack though.

Yes, you lose the game in two rounds, if you don't prepare in any way. The wording on Quachil doesn't allow any room for interpretation or rules lawyery of sort. You die, then you pass the first player token, and when there's no one else to pass the token to, well, that's the end of the story