"Everything is fine."
Хорошо is better, because нормально is neutral. I personally would translate it замечательно.
In Russian it goes: 5: Отлично/прекрасно/замечательно (=excellent, fine) 4 хорошо (well) 3 нормально (ok) 2 не очень хорошо 1 плохо 0 очень плохо
I'm Russian, so you can trust me :)
Ustressed 'o' sounds like 'a'. For more read here: http://www.livinglanguage.com/community/discussion/434/stress-vowel-reduction-in-russian-4-major-pronunciation-rules
It's still an H sound, it's just more pronounced. Think if the movies whwre people say Have or Happy with a thick accent. It's done with pressing your tongue down and forward against your bottom teeth, as you exhale. Where the usual H in english is done with pulling your tongue back away from your bottom teeth.
"Добро" is a noun. You probably think about this construction because you know "добро пожаловать" (welcome to) but it's something different. I think that nobody would use a word добро or доброе in this case. Actually it sounds more like Ukrainian "всё буде добре", in Russian you should say "всё будет хорошо" (or нормально/ замечательно/ отлично/ в порядке...). So you can use a lot of words to say that you are fine but not добро :) I am not a native speaker so correct me if I am wrong.