There is one problem I’m having, and that is the WEB-INF/classes directory is not displayed in the package explorer view.
No, it isn’t because it is the build output directory for the project and that view doesn’t display any build output directories. To see it you’ll need to use the Navigator view instead.
Further, it seems that all the .properties and .xml files are being deleted from the classes directory.
Eclipse cleans the build output directories before it compiles. If you place your properties and XML files in the appropriate location in a source directory they’ll be copied to the corresponding location in the classes directory when a build is performed.