I came back this morning to let people know about this. I imported a fresh set of stories and it appears that feeds are being imported and the base url is being attached to the link on the site as you explained in your post.
EX: A link to a story would be -
http://www.pligg.com/story?1928/g^837.html
The google reader feed page is formed correctly. It appears that the Pligg
RSS Importer is adding the base url to the story link so a submitted story link will read -
http://www.pligg.com/story?1928/g^837.html
http://www.pligg.com(added to posted story url)
giving viewers a 404 error when they try to visit the story site.
I am guessing that there is a function in the feed field name that should not be there, but I have been unable to find it. If it makes any difference the feed generated by Google Reader is an atom feed.
Any of you feed Gurus know the answer?