I guess I could try answering in place of OP since he hasn't replied yet.

In my own experience, many Japanese people appear to be afraid of foreigners. Why is this? I have not been to any other 1st world country where the local populace are so afraid of "the outsider." This appears to be worse with people from 20 to 50 years of age.

I think it's a combination of a lot of factors.

First there's the fact that foreigners (especially ones of a different race) are still somewhat of a rare sight when one steps outside the urban areas. So even though the average Japanese may have seen people of all races on TV, it may still be a shock to suddenly see someone of a different race "in the flesh".

This is my own theory, but if a country has a large immigrant population, people would generally be more used the idea that fellow citizens would usually share a very basic set of values but anything beyond that can/would be wildly different. But because of Japan being of country of a (mostly) homogenous ethnicity and culture, I think there's a large strata of shared "common sense" cultural norms and values beyond the basic that many people would consider as being essential to be considered a member of society; foreigners who are assumed to not necessarily share these values from their own little world would be assumed to be very alien.

Also Japanese people are constantly telling themselves that they are terrible at English (and other foreign languages). This is indeed true to an extent, since Japan was able to modernize using only their native tongue without needing to adopt any foreign lingua franca to jump start their economy/industry/science, and so there's no real imperative for people to learn a second tongue to succeed. But since one usually expects that one should obviously be able to communicate fluently with anyone they meet, people may not know what to do when suddenly faced with someone who they can't (or think they can't) communicate with, and feel quite uncomfortable.

Plus there's the very low crime rate that Japanese people pride themselves on, which on the flip-side would mean foreigners would be coming from a place with a higher crime rate, leading to the misguided prejudice that foreigners may be more of a potential criminal than the typical Japanese. White people seem to get a pass on this, but people of any other color may still viewed with some degree of suspicion by the unenlightened.

It's my assumption that any number of these factors come into play in the minds of Japanese people who are "afraid" of foreigners.

Do people still travel overseas anymore? Do they ever travel alone, with a family, or only in tour groups with no interaction with foreign people?

Of course they do. Maybe not as much as compared to the bubble economy of the late 80's but, plenty still do.

Many people seem to prefer to travel in tour groups, since they would feel helpless when they don't know the language, and so prefer the safety of the herd :) Also, you may be familiar with how overworked Japanese people are and how hard it is to get a long vacation. So a lot of people of working age, if they do manage to travel, are prone to selecting carefully planned tour packages that pack in as much sightseeing as possible in the allotted time.

Is staring at strangers not considered rude here?

Yes it's rude to stare. There are rude people everywhere in any country, but the rudeness here manifests with people who choose to stare at the strange foreigner because of the "omg gaijin!" reaction.

About 90% of my male colleagues don't bother to wash their hands after taking a shit, despite the fact that HR has placed detailed instructions in the toilets on personal hygiene and preventing the spread of diseases, why is this?

Your colleagues have disgusting habits, and I wouldn't consider it the norm.

Why are people obsessed with whether people can use chopsticks or not? I'm British, and we've had Chinese restaurants in Britain since 1907, and have had contact with China since 1637, so many people are familiar with the operation and use of common tableware.

I'm guessing it's just people not knowing any better and assuming "westerner = uses knife/fork/spoon only". They probably have never thought or wondered about how much chopsticks have become common in the rest of the world. Also using chopsticks does take a little practice compared to western utensils, and holding it weird or wrong is minor form of bad table manners, so it must stand out even more in their minds when someone who is assumed to be unfamiliar with it is able to use it normally.

There's also the "theory" that learning to manipulate chopsticks from an early age stimulates the development of fine motor skills and brain functions of children and infants, and makes the Japanese a smarter and more dextrous people. Regardless of whether people buy into this, using chopsticks is something that the Japanese are proud of and consider a part of their identity, hence the obsession.