Is cuddles eating the engineer?

The one wrapping around Shaw's leg is also forked, it snaps up like a snake if you watch closely.

I think the squid is still going through a metamorphosis. I mean, look how big its grown so far and why doesnt the engineer have any weapons to combat the crew or squid. How does he live on this planet on not worry about going through the same crap the prometheus crew has. Judging by how advanced the temple, ship and technology the engineers have developed.....why no fail safe, weapons or defence. The split snake leg could be changing into a hand at some point.

I don't know if it would eat him. I think perhaps while fighting it just burns him with acid...

Well, it clearly appears to have intent to kill. I doubt it's just giving him a hug. The other tentacles may be forked too; like a thumb for grasping.

Or cuddles implants a friend in the Engineer and cocoons it. I don't recall the xeno in Alien eating anything. However, there was a mention of a Nostromo store room that was raided. Not sure if the mention was from a book or old screenplay. Ash also says something about "considering its nutritional requirements" and doesn't expand on what they may be. Alien 3 showed a xeno munching on some prisioners. So, there is a possible Engineer munch down.

What if the engineer is nog fighting but helping Shaw?

Sorry to bring some reality to this speculationathon but 1) you don't know if that is the thing extracted from Shaw at the med pod and 2) you don't know if it is helping Shaw by attacking the Engineer , if the Engineer is helping Shaw by attacking the creature, or if the Engineer was attacking Shaw and that thing just attacked them both.