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Does "standalone" mean that it has no correlation with the events of "ECHO"?

it absolutely has some connection to the events of ECHO, mainly because of some... later things in that game. so prolly not.

Is it directly correlated though? Are there events that happen in smoke room that are part of ECHO's plot? Characters that appear from tsr in ECHO?

actually, yes. the main character hears some things, at least I believe he does... from a certain someone. i really dont wanna spoil anything. also the guy who got killed in the mines, isnt that the main thing about this game? the same event chase even went back for (aside from his friends reunion)? also the catalyst of some of the events in TSR?

The actual events of both novels are like decades, if not like almost a century apart, but if I remember correctly, one of the major reasons they are even there in the first place is to learn about the history of the town. Since TSR is part of Echo's history and Echo's "schtick" (for lack of a better word) is that it's essentially some mixture of haunted (by the past), dangerous (because of the people), and the fact that it seems to want to keep people in (the monster the characters in both TSR & Echo seems to have seen but cannot describe), the events in Echo seems to......well...Echo or repeat in the future, which is why all those characteristics of the town are present in all three games: TSR, Echo, and even the newest addition to the series, Arches. Hallucinations, the "it seemed so real" moments, and the fact that no one knows what the hell is going on are all what the town of Echo is known for. So while they don't DIRECTLY influence the events that happen in the future stories, there are certainly allusions to the past through dialogue, characters, and the events that the characters go through and noticeable similarities between everything. (sorry if that confused you/didn't really answer your question)