This is not sql ce specific and it is just the way it currently works. I think you could duplicate the problem on the demo site by enabling excerpts for the blog feed.
If you enable excerpts for the blog feed and no excerpt exists for the post we generate one but we don't have a good way to generate an html excerpt, it would be difficult to implement one correctly so that we don't miss any closing tags, so we generate a plain text excerpt and that has no formatting.
You can manually create the excerpts for blog posts, there is a tab for this in th eblog editor when you have excerpts enabled.
I'm open to improving this if somone comes up with a safe and efficient way to generate an html exceprt of a specified length that doesn't miss any closing tags and doesn't chop words in the middle. But until we have something to do that we can only safely generate a plain text excerpt.