a 'killer' excerpt that allows you to include formatting tags and control the excerpt based on wordcount.

WP_killer_excerpt.php

//Set the function up to receive any custom excerpt set by the user. 
function a_killer_excerpt( $text ) {
	//We'll be using the post object, so we need to call the global object down to play with later.
        global $post;
        //This if loop makes it so it will only display this modified excerpt if the user hasn't manually set one. 
	if ( '' == $text ) {
                //Get the full content of the post. 
		$text = get_the_content('');
                //Apply all the_content's standard filters.
		$text = apply_filters('the_content', $text);
		$text = str_replace('\]\]\>', ']]>', $text);
		$text = preg_replace('@<script[^>]*?>.*?</script>@si', '', $text);
                //Tags you want to include in the excerpt.
		$text = strip_tags($text, '<p> <strong> <bold> <i> <em> <emphasis> <del> <h1> <h2> <h3> <h4> <h5>'); 
		$excerpt_length = 100; //Word count
                //The following turns the received text into an array, with each space-separated word as an item.
                //This lets PHP count the number of words and remove all but the first $excerpt_length count of words.
		$words = explode(' ', $text, $excerpt_length + 1);
		if (count($words)> $excerpt_length) {
		  //This pops the last word off the array...
                  array_pop($words);
                  //...and replaces it with an ellipsis.
		  array_push($words, '...');
                  //Then we merge it back into a string.
		  $text = implode(' ', $words);
		}
	}
//The last action is to return the now modified string back to the theme to display.
return $text;
}
//Tell WordPress that we don't want to use its boring excerpt code.
remove_filter('get_the_excerpt', 'wp_trim_excerpt');
//Tell WordPress to use this excerpt code instead. 
add_filter('get_the_excerpt', 'a_killer_excerpt');