1 - The simulator comes with default LMKs so you don't need to go through that.
2 - You need to create your own of course. Different set of LMKs, remember?
3 - There's no command to encrypt a clear PIN block. That happens at the device (ATM, POS, pin pad).
4 - Issue 5 is indeed an old one. Google around to get at least to 6.1 for HSM 8000.