OK, I found the solution. I was doing test posts with categories that had only one post in them. By taking away "offset=1" everything works fine. So the solution is:
$myposts = get_posts('numberposts=2&&category=1');
foreach($myposts as $post) :
<li><a href="<?php the_permalink(); ?>"><?php the_title(); ?></a> --- <?php the_excerpt_reloaded(15, '', 'none', TRUE, '', FALSE, 2); ?></li>
Now I have an additional question. I have some sub categories, and I noticed that this function doesn't seem to include the posts of those sub-categories when selecting a parent id, e.g., category 1 is the parent to categories 3 & 4, and when I enter category "1" into the code above, I am not given the posts from categories 3 & 4... like a category page works. Instead I am given only those that are specifically filed under category 1. Any idea on how we can modify the code to work accordingly?