Can single molecules of C and O2 react in isolation, and if so how will momentum be conserved?
$\ce{C + O2}$ is awfully complicated, so let's just pretend you've asked this:
In a single act of the reaction $\ce{H. + H .-&gt; H2}$, how is momentum conserved?
That's a legitimate concern all right. After all, we are taught that this reaction does happen instantly, once given a chance, and that's in fact true. Also, we know that it releases a lot of heat. Now, heat is nothing but the motion of molecules; how does energy convert to the motion of one molecule as a result of one single reaction act?
It doesn't. The conservation of momentum forbids that, just as you reasoned. Chemical reactions are collective phenomena. Nobody cares about a single molecule.
Now what really happens to a single molecule which has just formed as a result of the mentioned reaction? That's really simple: the molecule is vibrating wildly, ready to break apart. Is has just enough energy to do so. It will do so half of the times, or maybe more often. But that doesn't matter. What matters is that sometimes the vibrating molecule will hit another molecule and sent both of them flying away in opposite directions, thus releasing a part of its energy and becoming more or less stable.
An emission of a photon is also an option, but that's another story.
So it goes.