It can not determine if an input or output is failed or if the device is metering properly.
Speaking for transmission level IEDs at least, as lower end IEDs mean reduced price levels, meaning reduced capability and more basic technology:
To a certain extent it can. Binary input and output modules do have self supervision or watchdog supervision and detecting if a particular module failed is achievable. Detecting if the actual output relay contact failed is difficult though, you can only detect that once you try to close it. But there's far more electronics on the module then just the output contact that needs to be supervised and typically this has a higher failure rate, as the output relay is a completely enclosed unit.
Metering is quite easy. One solution is that the analog input has 2 separate measurement elements (low rating / high rating) that are used to measure small currents as accurately as high currents. Additionally the values can then be compared to each other and if they fall outside a certain bandwidth, the measurement / analog module is reported as faulty to the IRF and software system.
It's important that the watchdog driving the IRF lives outside of the software process. If the software halts due to a bug, which can be dealt with by rebooting the IED for example, the watchdog has to report this. It can't if it's part of the software itself.
Doing IRF over software / communication is perhaps a nice addition, and as far as I'm aware any modern IED with self supervision can do so, but as communication is one of the weak spots to begin with, it seems rather pointless to me. Hardwire the IRF to another device, be it an IED or RTU or annunicator, and have that one report it upstream.
Never heard about the terms unmonitored and monitored though. Every IED I've seen has an IRF contact. But I'm not so familiar in the low end segment.