I am wondering WHY would you need to struggle with a custom Loop for this? If using the default Page template for your “posts page” the more should work properly.
When I try using the default Page template, and designate it the “posts page” under “options” -> “reading,” that page just displays what is on the home page (home.php).
Maybe it will help to look at my site. I just want a page that displays the latest 5 posts and utilizes the “more” tag.
that page just displays what is on the home page (home.php).
This one above seems to be the key sentence: If you are using the Options > Reading method to set your main/home/front page – you do NOT need a home.php… that’s for earlier stages of WP.
If you set a Page to be your blog Page, you also need to assign another Page as your frontpage.
Both Pages have to be created BEFORE you go to the OPtions.