It sounds like you are using a single workflow and then making the determination within the workflow if the item is modified.  Why not have 2 separate workflows?  One that runs when the item is initially created, and the second that is set to only run when the item is modified?  

For your second question, if you split up the workflows, you can then manually pick which one to run if there is an error.  I'm assuming the issue is that the process for when an item is created is failing.  So when you go and try to run it manually, since it will be a new version it's going down the modified trail. However if you have a separate workflow for the created/modified process, you can just pick which one to run. 

Additionally I'd work on trying to fix the query process so that it doesn't error out.  Do you know why the query is failing?

You can have a SharePoint List Column named IsSubmitted, which is set to 1 when the form is created and the same set to 0 if the form is edited. 

With a check on this field you can have:

1. A workflow which can be triggered on Item Creation and Item Modification, which first check for the IsSubmitted to find if it was triggered on creation or modification and perform actions as required
2. Have 2 separate workflows, one workflow to start on item creation and another on item update where condition check can be done if IsSubmitted (previous data) != IsSubmitted (this will ensure only on the item's first update this workflow executes)

This seems way more complicated than just having one workflow start on creation of a new item and one start on modification of an item, but maybe I'm missing something.

Since the query is working fine now, I have to assume it was a Sharepoint hiccup and keep an eye out for it to happen again.  I like your idea of running two workflows, one for "new" and one for "modified".  Thanks Brendan!