Ok, I checked your installation and it seems its still not runing the latest version of my theme. Please update it, might still be that you are suffering from a bug that was causing the problem a few versions before.
Your second problem can be fixed by just openening the apropriate tempalte files and search for any occurence of this (or a similar) line:
< a href="<?php echo get_permalink() ?>" class="more-link"><?php _e('Read more','newscast'); ?>< /a>
Here you can change the Read more directly. Ane xample would be index.php line 138 and 178
The problem with your permalink structure is nothing theme related, thats a wordpress internal setting to add the category keyword before categories. I don't know if it can be removed but I am pretty sure there are plugons on wordpress.org available which can do that :)