First, the term is intersex and not hermaphrodite.
Second, from the reports Semenya's condition is most likely AIS. XY chromosomes but since the body does not absorb the hormones necessary for normal male development she has internal testes, no womb and a vagina.
As to what gender Semenya is I say she is whatever gender she says she is and that's that.
As far as competing in women's events. They claim she has 3 times the average testosterone production of the average female. Which, given the wide range of levels exhibited by both males and females could mean she is barely outside the average range for females. Males have 7 times, if I remember correctly, the testosterone production of females.
Her times, while incredible, do not even qualify her for the top 10 in the women's 800m. Her record time for 2009 is not as fast as last years time by Sigrun Grau. Compare to the records for the men's 800m it's not even close.
I say leave the woman alone. Let her compete. The so called "fix" I've read in a couple reports actually involves a procedure to remove the testes because they can pose an increased risk of health complications. I don't know what level of risk that actually is but it's not "fixing" her.
Here's a woman discussing her life with this condition:
YouTube - "Women With Male DNA"
edit: Someone on another forum made me aware that some intersex do adopt the term hermaphrodite. I will consider myself corrected on that point.