Comma Coma #4: She said, "He said." Writing Conversations

It seems that my appetite for comma comments is large.

 In my last blog, I recommended that you be selective in your choice of insertions.  Some commas are considered more necessary than others, such as the comma that introduces a quotation.  

My student wrote:

One day my frustration came out in a question to my manager "What would you do if I resigned?"

I'd put a comma after manager.  I'd put a comma before every quotation in order to indicate a new tone of voice and to separate the quotation from the rest of the sentence.

I would also put commas and periods inside quotation marks, like this:

"The town was just too small for that to happen," Joe told me, "and we have to placate the rowdy bullies."

Punctuating quoted material requires thought.  For example, let's take a long quotation and put our "he said" in the middle:

"My teacher is obsessed with punctuation," he said, "and is force-feeding us a solid diet of commas."

1. Why is the second comma in that sentence?  Why is "and" not capitalized?
2. How would you change the quotation and punctuation if you decided to put a period after "said"?

EDIT:  My students often want to put a period after a quotation that ends in a question mark or exclamation mark.  Here is a sentence I just read:

I should have said, "Are you saying the dress code is unreasonable?  Is that it?".

There is no need for the final period.  The question mark adequately ends the sentence.

One more thing:  

Start a new paragraph with every new speaker.

From my student's essay:

"How can I be a better listener?" I asked my wife.  She replied, "Show you're listening by looking at me, nod, smile, and take out your earbuds."  "I can hear you with my earbuds in," I replied defensively.

Rewrite:
     "How can I be a better listener?" I asked my wife.  
     She replied, "Show you're listening by looking at me.  Nod, smile, and take out your earbuds."
     "I can hear you with my earbuds in," I replied defensively.

Answers

1.  "[H]e said" should be considered an interrupting phrase and is, thus, surrounded with commas.  "And" is not capitalized because it does not start a new sentence.

2.  "My teacher is obsessed with punctuation," he said.  "He is force-feeding us a solid diet of commas."