Translating this as "Really!" is not wrong, but may be a bit too weak. I feel it's closer to "That can't be!", "Unbelievable!", "I never dreamed of it!", etc. It's not an intensifier but an interjection-like expression on its own. That is, it's not directly connected to the remaining part of the sentence.
is necessary in this case. This is because works as a comment about the surprising news he just heard. Without that explicitly switches the topic, the last half of the sentence would mean "How stupid it/he/she is!", referring to the news. Compare:
> !
> Unbelievable! How stupid! (←this refers to the news itself)
>
> !
> Unbelievable! How stupid I am! (←he is disappointed at himself because he could not think of the possibility of what he heard)