In the event of a leak, in the cupola for example, can they isolate individual modules of the ISS?
Yes, the modules have hatches at each interface to another module. You mentioned the cupola, so here's a picture of the hatch between Node 3 and the cupola. It's kind of hard to see, so I labeled the hatch track (1) and the hatch itself (2). Astronaut Kay Hire is floating in the interface between the cupola and the Node.
As Uwe stated in a comment, the first step in troubleshooting a major leak is to try isolating to a compartment. After checking the Soyuzes and their vestibules (because they are the escape craft!), a sort of binary search starts, closing hatches one at a time to find the leaking module. The search starts with the Node 1 aft hatch, which essentially divides the ISS into the US and Russian sectors.
Source: NASA has not chosen to publish current ISS procedures, so sadly, personal notes.
I heard astronaut Alexander Gerst in a German TV interview about this question.
A hatch is closed to split the ISS in two parts and pressure loss is watched in both parts to find the leaking part. Then the part with the pressure loss is again split in two parts and so on. This is the binary search as written by Organic Marble.
But the astronauts should be carefull not to lock out themselves from the docked Souyuz capsules needed for return or rescue. All astronauts should be in the part with access to the capsules.
Before closing any hatch, they should think if this hatch may opened again when pressure on both sides is different. If the hatch opens only in the wrong direction, another hatch should be used.
If the leak is isolated to a single compartment, ultrasound leak search devices may be used to find the hole.