The setting was already on Full Text for For each article in a feed, show.
Unfortunately, some themes (like the one you’re using) ignore that setting.
Any idea how to fix the formatting. If you compare it to the way it looks inside the actual blog post it’s not supposed to be just one big paragraph of text.
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Or better yet, where in the theme can I go to edit this myself?
By default, WordPress strips out all HTML tags on post excerpts, so there is typically no formatting, including paragraph breaks. The reasoning behind it is that if there is an opening tag somewhere in the excerpt, but the closing tag doesn’t come until after the last word in the excerpt, then it could throw off the formatting for the rest of the entire page. There are plugins that you can try that will output fully formatted excerpts. Advanced Excerpt looks like it might fit what you need.
Or, if you would rather display the entire post instead of the post excerpt, you can substitute the_excerpt() with the_content() and you should get the entire post content. The syntax is fairly easy, just read the documentation for the function. You would edit the same file where you found the_excerpt() (typically postformat.php or content.php, depending upon the theme).
One thing to note, though, that you should not edit the theme files directly. If the theme gets upgraded/updated because of a bug fix, security patch, or feature enhancement, your changes will be lost. The recommended procedure for making changes to a theme is to first create a child theme, then make changes to a copy of the file that you want to modify. Then if the parent theme gets updated, your changes will still be intact in the child theme.