Have a "Prefer selected object" as a selection preference toggle.
When an object is already selected, allow for a soft isolation by preventing objects on top of the stack (or below and nearby) getting selected or adjusted when using path/point modifiers.
This should be separate to isolation mode as that alters the appearance to objects on the artboard.

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A huge thank you for the details you provided.
Makes a lot of sense and I’d personally would love to have something like this. 'Prefer selected object' would be especially useful for Curvature tool, because now it gladly starts editing another path when you just want to place a new point over the existing unlocked path (which should be just fixed).
I use Ctrl+> to enter the isolation mode, and a custom hack via Autohotkey (Windows only) to be able to to exit one level back with a Ctrl+Backspace hotkey as well. I know the team is going to make it actually available. I am used to these, exactly because I want to edit stuff without a risk to spoil the other stuff, to be able to marquee with the Direct Selection tool. I’d also wish the stuff outside the mode was ignored by Smart Guides (if I choose to!), but’s that’s another request.
However, it seems unlikely to me another way of isolation, effectively the same, is going to be added :( But let’s see how much votes it gets! I add mine.
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Russ commented
The way I see it functioning is this.
Within the selection options of the preferences there is a toggle for "Prefer selected object". This could also appear on the "Control" bar in the main workspace.
The extra steps (I personally use a keyboard shortcut to invoke "isolation mode") adds friction when doing a lot of quick changes, so I envisioned it more like a "soft isolation mode", which doesn't prevent you selecting other objects, but requires you to tap off (thus deselecting everything) and leaving you with nothing selected. The prefer selected object option is then essentially reset and ready for the next object to be selected.
The main reason for this option is to allow for lots of quick changes, (adding/deleting points, Corner manipulation etc) without something like the pen tool creating a new point that deselects the current path (because it wasn't zoomed in close enough to register) and then just creates a stray point that you then have to find and delete.
The only issue I can see with this is when people prefer the object selection method rather than path selection. However it would be more of a power user tool so having it as as sub-section under the "Object selection by path only" would work well and prevent a feature being perceived as a bug. Much like the "Animated Zoom" function as a toggle under "GPU Performance".
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Russ, so if there was an option to tweak the isolation mode so it doesn’t pale the art outside, it’d be OK for you?
Or you need both pale und this new non-pale modes at the same time?
Please tell more.