Can the verb "underline" be used to emphasise a word?
As you surmise, the usage is metaphorical, suggesting that if it were written, it would be emphasized with an underline. Verbalizing punctuation or other mechanics is not uncommon in informal speech.
You will never do that again, period [full stop]!
You will capital-N never do that again!
You will never do that again, dot dot dot, never!