I have two specific questions about monster activations:

1.) Engage -Lets say that a monster is told to engage the closest hero. If they are already next to a character, are they considered engaged already? If so, are they considered to have used one of their activations to engage that hero they are next to?

2.) Spot -When monsters are told to spot a hero, they are to move within 3 spaces (if possible) of the hero and have line of sight. What if they can move within 3 spaces of the character but can't get line of sight. Do they still carry out the spot action even if they can't get line of sight or do they skip that action?

1. Yes, they are already engaged, so no it does not count as an action.

2. Depends. Is it a case of they didn't have enough movement points to get into LoS? If so they move as far as they can and will probably end up taking another spot action. Some more details on this question would be helpful.

Example:

1.) Spot a hero

2.) Attack the closest hero. After attacking the hero, perform a move action and retreat.

3.) Engage a hero.

So the monster in the activation chain would attempt to spot a hero first. The monster can move within 3 spaces of the hero but his LoS is blocked by other monsters or heroes no matter where he moves within 3 spaces. Does he still perform the spot action or go on to actions 2 and 3 in the sequence?

In your theoretical example (I can't think of any monsters in the game that attempt to engage after attempting to spot mind you) The monster would move as close to the hero as needed with action `1 to get in LoS.

For example, let's say a monster has 4 speed and is using your list of actions. So first action he can't get LoS from 3 spaces away, but he can if he moves closer. In this example the monster would move all four spaces and be within 2 spaces of the hero, then attack and be stuck since he's not able to make a second move action.

Second example, say the hero is further away and even when moving all four spaces the monster still doesn't have LoS. So he would skip action 2, and proceed to action 3, moving adjacent to the hero and then sitting there like an idiot.

Spot really just means move the monster to at most 3 spaces from a hero with LoS to that hero. If a monster has to move close than that to get a shot it will. If it for some reason still can't get LoS then it moves as close as it can, and moves on down the action list.