Replacement (restoring parts of the broken functionality)
Since Better iGoogle is now broken due to changes made by google and there seems no further development by the author of this script and I am in desperate need of some of the features it used to provide I have started making an alternative.
The following is an iGoogle gadget that is meant as a replacement for the stock RSS gadget from google. It does not yet contain all features that I wanted but It can already mark the feed read and collapse it (most important feature of all) and it has a setting for the refresh time which avoids caching of the feed (this is the second most important feature that google forgot to put into their feed readers). Mouse-over popup is only implemented as the standard browser tooltip but this is better than nothing.
You will have to replace all your feeds with this gadget which is some work if you have a lot of them but its worth it. If you need a list of all your feed addresses then simply use the backup-to-file feature of iGoogle and open the file in an editor. There you will find all your feed addresses.
Add the gadget, enter the address of an RSS or Atom feed and select a refresh interval in minutes. It should instantly display the feed. If you click the little "ok" on the top it will mark the feed as read and collapse to the smallest possible size that is allowed by iGoogle. If new items arrive it will show only those.