Problem in replacing the_content with the_excerpt()

Are you sure you have replaced it in the correct template file?

I found a useful way to tell by adding this to the functions.php file:

<?php
    add_action( 'wp_head', 'adminbar_print_template' );
function adminbar_print_template() {
    global $template, $current_user, $wp_admin_bar;

    get_currentuserinfo();
        /* If you have more than one user deny. Be sure to use your user ID! */
    if ( !is_user_logged_in() && $current_user->ID != '1' )
        return;
    if ( is_admin_bar_showing() )
        $wp_admin_bar->add_menu( array(
            'parent' => false,
            'id' => 'template',
            'title' => $template,
            'href' => '#'
        ));
    else
        print_r( $template );
}
?>

If you have the Show Admin Bar settings set to “show when viewing site”, it will output the current template file being used on the page you are viewing. Another possibility could be that your theme uses a loop.php file, and you will need to modify it for the excerpt.

TIP:
Add this to your functions.php file so the “Read More” tags are actually links to the posts:

   function new_excerpt_more($more) {
   global $post;
   return '… <a href="'. get_permalink($post->ID) . '">' . 'Read More &raquo;' . '</a>';
   }
   add_filter('excerpt_more', 'new_excerpt_more');