Display Read More Content with Line Breaks

This is what I have in the Main Index Template – index.php

<?php the_post_excerpt($excerpt_length=40); ?>
</div><!-- POST CONTENT END -->
<div class="readmore"><a href="<?php the_permalink(); ?>" title="<?php the_title(); ?>">Read More</a></div>

This is what I have in the Theme functions – functions.php

[code moderated – please use the pastebin for any code longer than 10 lines]

I’m not so good with PHP and I’m not looking for any handouts here but if you or anyone could help me identify where to focus my search, that’s be awesome. It looks like this is a custom read more function?