I'm trying to understand exactly how Tor builds a circuit with encryption. I've read the Tor design literature and have a pretty good grasp on it, however I'm left with the following misunderstanding.
When Alice, the client, goes to build her circuit, she will choose a node, say Bob, from the list of nodes distributed by Tor. She will find Bob's corresponding "onion key", which is I believe a public 1,024 bit RSA key (please correct me if I'm wrong). Alice generates the first half of a Diffe-Hellman key exchange, encrypts it with Bob's onion key then sends it to Bob, who decrypts it, generates his half of the DHKE and sends this to Alice along with a hash of the new symmetric key which they will use to encrypt future messages, which is known as a "session key".
Question 1: Does Bob send this message back to Alice in plaintext? I know that by nature of a DHKE even if an eavesdropper obtains Bob's half of the exchange he still cannot determine the secret key so I'm not sure if there is a need for encryption from Bob back to Alice at this point but if so, what type of encryption is it?
Also, if my understanding of the Tor encryption model is way off or there are any errors in my explanations, please let me know, if you can. Thank you.