Is Pathauto designed to modify URL requests? I have configured Pathauto to redirect /node/23 to /resource/resourcename. Should it render menus as /resource/resourcename, or still /node/23? If a user requests /node/23, is Pathauto supposed to change the request to /resource/resourcename? 

Currently, it does allow for /resource/resourcename to be used, but it does not actively change /node/23 if it is entered.
Pathauto only creates path aliases for nodes, users, etc. based on patterns, i.e. /node/23 will also work with /resource/resourcename. However, no redirect is made. If you wish to redirect the node path to the path alias you could use the Global redirect module.

Once an alias is created all menus etc. will use the alias instead of the real path, in fact, all links created with the l() (url()) function.