Can a faulty USB device fry other devices on the same hub?
It is possible, particularly if the device is self-powered. Attempting to draw too much current or even a dead short will not hurt a proper USB host port. However, accidentally applying high voltage to either of the data lines could be bad. At least that could blow out the drivers for that port, but it's no stretch to imagine it could take out the whole hub chip.

This is not a place where fuses are reasonable and would do anything useful anyway. By the time a normal thermal fuse trips, the hub chip will be long dead. Putting anything else in series with these lines is a problem since they have to carry high speed signals.  The hub chip will have protection diodes or similar to power and ground. That will protect against the occasional static discharge. Protecting against anything more than that would be expensive and not worth the extra money for the very rare case it saves something. It makes no sense to waste even a few pennies protecting a $50 motherboard when this protection will only matter once in every 10,000 cases.

You can't apply line power to the audio jack, the video output, and most other external connection points of a PC. I don't see why USB should be singled out for extra and burdensome protection.