Ok, first, yes bacteriophages can be used to cure diseases. But mostly, they are used in topic agents (on the skin) to kill bacterias that would infect open wounds. In the glorious time of USSR, a dried powder made out of dehydrated (not killed) bacteriophages was of common usage among the soldiers to apply on wounds and prevent infection.
Second, as bacteriophages kill bacterias,we DO NOT have to engineer them to do this job. They will NOT infect human. The reason why we don't inject them in the blood or other is because they could create an immune response as they are made out of proteins.
Third. Escherichia coli (E.coli) is in fact the flesh-eating bacteria.
Fourth. This story of injecting E.coli into a brain tumor is quite dubious, although not impossible. But if it worked (reduced the tumor size), it has more to do with the very robust immune response that occured after this injection. The engaged immune response would have been strong and therefore also "noticed" the tumor and start attacking it.
I think it answer every questions for the moment.
See you!