I see that there is a 1.xml file generated in the sites/default/files/xmlsitemap folder, but I do not see a file in the Drupal root. However, when I call http://www.example.com/sitemap.xml I do get the info. Is this the normal behaviour?
Yes, that's normal behaviour.
xmlsitemap_menu() includes a route for /sitemap.xml specifically.
This is utterly normal behavior: the module caches the sitemap in the files directory, then delivers it via
http://www.example.com/?q=sitemap.xml which gets mapped to
http://www.example.com/sitemap.xml with clean URLs.