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How understandable is it in an online magazine to use something like this
where the left and right arrows link to the previous issue (no.2) and the next issue (no.4)?
And is effectiveness improved by either changing colour when the symbols are hovered over, or underlining? I am worried that too many users won't get what the purpose of the arrows is.
If you differentiate the arrows and the text, by changing the arrow colors it should be obvious that the arrows aren't there for decoration. Hover effects on the arrows should be a color change. Reserve underline effects for text only.
To make the function of the arrows extremely intentional add a visual tip on hover stating the effect: previous issue or view the previous issue #2
Something similar is frequently used in magazine websites. The difference is that the arrows are usually on the right and left side of the content like in the image below.
The type of navigation you are trying to use is slightly different but if the box with the arrows is placed in a place visible to the user, it should work fine. If you are still not sure about this method, you can always add "Next issue" and "Previous issue" next to the arrows to make it even clearer. Just remember to make the arrows look like buttons, not text. Perhaps you should give them a different colour and/or frame?
