Well, I've not completed a code review, but here are some answers to your questions as best I can offer:
Q/C: One thing I've discovered is that the amount of text you can enter in the Custom Text box is quite limited. If you put in too much then it just truncates it and defaults to the Solutions explorer view.
A: Yes, that's true enough. I wouldn't put anymore text than what is in the default area. I'm not sure how many characters it allows (need to review the code a bit more). I use a custom opml file, instead.
Q/C: I haven't been able to figure out the addressing for the Custom OPML URL/File.
I place my custom OPML file in the website root. Again, I've got more review to do, but that's what I've done for now. Also, I've been testing DNNv04.06.00 RC at home this morning, and found that there is a default news.opml file. I've customized that file and when I use the option news explorerer it will default to rendering that file, which is copied from the syndication area to your portal#. So, in my case, the folder location is website/portals/0.
Q/C: New items in the feed seem to be coming in at the bottom rather than the top of the feed. How can I reverse this?
Q/C: Title links work fine, but links with in the body have myurl% added on the front and won't work. Can I fix this?
Q/C: Also, no pictures - possibly an addressing problem/trouble finding the url similar to the above?
A: The other questions I can't answer at this point without seeing your opml. As I've said, the rendering of the OPML is very strict, but most of the issues I've seen are due to some issue with specifying the url in an acceptable format. Remember that & has to be changed to & and that there are some other illegal characters that will cause issues. The same type of illegal characters that cause issues with XML/XSL rendering apply to OPML.
I have no issues with seeing the pictures in a feed for google or others, and the feed order is probably a function of the browser setup, or feed itself. As best I can see the rendering is handled by a browser object, not an iFrame. Formatting is dependent on the feed source. Depending on your URL specification, you'll get either the standard FeedBurner format, or the browser XML default formatting. I've not found a way to alter the style yet.
Also, as you probably found, the number of tabs you can use depends on your skin style. I use a full page to render the module without other modules on it. Your 1st example site was not found or available, but I was able to see your 2nd example. Again, can't tell you why you are having the issues you mention without seeing your OMPL. As far as it being ready for prime time, I think that's a function of working with it a bit, and testing your links prior to putting into production, just like any other module. I think it is ready, but you've got to give it some time to make it work for you. To be honest, I would guess the FeedBrowser is probably going to be phased out, once the NewsFeeds (RSS) module is updated to leverage the built-in support that is being used in the current module. That's just a thought, I'm not on the project or Core Team, so it's just my opinion. However, the FeedBrowser module is pretty slick for what it is, though, and I'm still learning about the technical aspects of it.
I am spending most of my free time looking at the code today, and hope to learn and share more in the coming week. Hope that helps a bit.