The mapping of OD variables to response values from the web service is done primarily via the WSOP wizard or the WSOP editor. When you go through the wizard, the last two pages let you specify what OD variable you wish to use and the web service values for which each variable should be used. The web service connector then maps response values internally, like the ones in the XML, to the OD vars that are defined in the WSOP editor. You can confirm this by opening up the WSOP editor and checking out how the variables are being used. The Output Parameter section will have Parameter Name, Parameter Type, and then the OD variable and field (if any). If the Use Java Object box is checked, then yes you will probably have to write Java code to get the values.
For your issue, it doesn't look like you need to write Java code, since the returned XML seems simple enough. There is some weirdness with how the variables are being used, however. When you say that you looked at the Java code, which code are you talking about? The files in WEB-INF/src/connectivity.ws.beans? WEB-INF/src/connectivity.ws.operations? Somewhere else? Did you modify the Java code directly?
Lastly, go ahead and post your WSDL here and I can try and create the WSOP myself to see what happens. We have this new forum now, and you can actually attach the WSDL file by clicking the Attachments option (hopefully that option is available to you?), rather than copy/pasting the WSDL text.