I see that I can change the Body text of an incoming SMS text msg on my Droid3, in the SI_MessageReceived() method, but when I view the text msg in my phone's SMS text message, the Body message is the original. Can I make permanent Body text changes or no?
No. Unless there is another application that uses the same priority or above. Note that PhoneEvents and SmsInterceptor will only work when the service is alive. This means that in your case you should call Service.StartForeground.
And if your app send messages do they show in the logs as well?