Diagnostic testing may represent a key component in response to an ongoing epidemic, especially if coupled with containment measures, such as mandatory self-isolation, aimed to prevent infectious individuals from furthering onward transmission while allowing non-infected individuals to go about their lives. However, by its own nature as an imperfect binary classifier, testing can produce false negative or false positive results. Both types of misclassification are problematic: while the former may exacerbate the spread of disease, the latter may result in unnecessary isolation mandates and socioeconomic burden. As clearly shown by the COVID-19 pandemic, achieving adequate protection for both people and society is a crucial, yet highly challenging task that needs to be addressed in managing large-scale epidemic transmission. To explore the trade-offs imposed by diagnostic testing and mandatory isolation as tools for epidemic containment, here we present an extension of the classical Susceptible-Infected-Recovered model that accounts for an additional stratification of the population based on the results of diagnostic testing. We show that, under suitable epidemiological conditions, a careful assessment of testing and isolation protocols can contribute to epidemic containment, even in the presence of false negative/positive results. Also, using a multi-criterial framework, we identify simple, yet Pareto-efficient testing and isolation scenarios that can minimize case count, isolation time, or seek a trade-off solution for these often contrasting epidemic management objectives.