custom page with post content using read more

Question

You’re actually doing this in a way that is far more complicated than necessary. The foreach is actually excessive. What you want to do is something more like this:

$args = array(
    'posts_per_page' => '-1',
    'post_type' => 'post',
    'post_status' => 'publish',
    'category__in' => $quicksand_categories 
);                     

$query = new WP_Query( $args );

if ($query -> have_posts() {
    while ($query -> have_posts() {
        $query -> the_post();
        // Do your display stuff here
    }
}

This puts the Post object in a global $post variable, so now you can easily use functions like the_title() or the_permalink() to print content without passing around an ID value to a bunch of echo calls.

For example:

where you have: <a href="<?php echo get_permalink($item->ID); ?>">

You can now have: <a href="<?php the_permalink(); ?>">

Or, instead of $item->post_content, you can just use the_excerpt();

Ultimately, the_excerpt() is what you want to use in this case. Here’s a link to the codex entry. There are also some good examples there of how to customize it to your liking (like including a custom “read more” link).