the dialogue box is on layer 'dialogue', so the idea is that it's supposed to go away by making the entire layer it's on invisible when you're no longer overlapping the npc sprite.
to answer your second question, not it does not. it doesnt go away even if you disable pressed E either. if you disable pressed E, the dialogue appears when you overlap the sprite and stays when you are no longer overlapping the sprite, even though that's the condition for the layer to turn invisibile again.