Formatting paragraph breaks in excerpt

Hi, I've adjusted my excerpt length because my blog uses longer excerpts before the "View More" but when I do post longer excerpts, all my paragraph breaks (and other formatting too, I believe, like italics) get wiped out. Any fix for this? My site is www.theprocrastiwriter.com, but I've regretfully shortened most of my excerpts, though older posts should still show what I'm talking about. Also, I've tried every piece of code suggested to get rid of all the padding around my header image, and nothing works. Any ideas? Thanks.