Only 1000 messages are visible when I browse a queue.

Hermes out of the box only displays the top 1000 messages. In the Configuration->General property sheet set maxCachedMessages to another value or 0 for no limit to the number of messages cached.

Can I use a JMS MessageConsumer to browse a queue?

Yes, click on Use Consumer in the sessions configuration.

How to I use the jms2xml format JMS text messages with XML payloads?

Use a CDATA section as so:

<text>
   <![CDATA[
      <?xml version="1.0" encoding="UTF-8"?>
      <yourdoc>

      </yourdoc>
   ]]>
</text>

See also this thread

When I delete a message from a queue, why is it still displayed?

Hermes does not automatically refresh a queue if you remove things from it. You may want to remove some more messages or even change your mind and put the one cached in Hermes back onto the queue again.