And we have done it for other formats: PDF is now quite well supported in browsers without plugins/etc.
It's a format intended for be consumed like an API call. It's like JSON. The link is something you import into an aggregator.
RSS feeds shouldn't even be displayed as XML at all. They should just be download links that open in an aggregator application. The same way .torrent files are imported into a torrenting client, not viewed.
1. This is pretty difficult for someone who doesn't know about RSS. How would they ever learn what to do with it?
2. Browsers don't do that. There used to be an icon in the URL bar when they detected an RSS feed. It would be wonderful if browsers did support doing exactly what you suggest. I'm not holding my breath.
I'm not looking to replicate my blog via XSLT of the RSS feed: that's what the blog's HTML pages are. I just don't want to alienate non-RSS users.
I don't think you need to worry about "alienating" non-RSS users. If somebody clicks on an RSS link without knowing what RSS is and sees gibberish, that's not really on you. They can just look it up. Or if you want, you can put a little question-mark icon next to the RSS link if you want to educate people. But mostly, for feeds and social media links, people just ignore the icons/acronyms they don't recognize.