1.Go to "Template" --> "Edit HTML" of your blog.
2.Click on "Expand Widget Templates"
3.Scroll down to where you see </head> tag.
4.Now add below code just before </head> tag.

<script type='text/javascript'>
summary_noimg = 250;
summary_img = 200;
img_thumb_height = 150;
img_thumb_width = 150; 
</script>
<script type='text/javascript'>
//<![CDATA[

function removeHtmlTag(strx,chop){ 
 if(strx.indexOf("<")!=-1)
 {
  var s = strx.split("<"); 
  for(var i=0;i<s.length;i++){ 
   if(s[i].indexOf(">")!=-1){ 
    s[i] = s[i].substring(s[i].indexOf(">")+1,s[i].length); 
   } 
  } 
  strx =  s.join(""); 
 }
 chop = (chop < strx.length-1) ? chop : strx.length-2; 
 while(strx.charAt(chop-1)!=' ' && strx.indexOf(' ',chop)!=-1) chop++; 
 strx = strx.substring(0,chop-1); 
 return strx+'...'; 
}

function createSummaryAndThumb(pID){
 var div = document.getElementById(pID);
 var imgtag = "";
 var img = div.getElementsByTagName("img");
 var summ = summary_noimg;
 if(img.length>=1) { 
  imgtag = '<span style="float:left; padding:0px 10px 5px 0px;"><img src="'+img[0].src+'" width="'+img_thumb_width+'px" height="'+img_thumb_height+'px"/></span>';
  summ = summary_img;
 }

 var summary = imgtag + '<div>' + removeHtmlTag(div.innerHTML,summ) + '</div>';
 div.innerHTML = summary;
}

//]]>
</script>

Note : You can change below values as your choice.
summary_noimg : number of character to display when there is no image.
summary_img : number of character to display when there is an image.
img_thumb_height : hight of the post thumbnails.
img_thumb_width : width of the post thumbnails.
5.Now Scroll down to where you see this:

<data:post.body/>

6.Replace above code with below code.

<b:if cond='data:blog.pageType != "static_page"'>
<b:if cond='data:blog.pageType != "item"'>
<div expr:id='"summary" + data:post.id'><data:post.body/></div>
<script type='text/javascript'>createSummaryAndThumb("summary<data:post.id/>");</script>
</b:if>
</b:if>
<b:if cond='data:blog.pageType == "item"'><data:post.body/></b:if>

<b:if cond='data:blog.pageType == "static_page"'><data:post.body/></b:if>

<b:if cond='data:blog.pageType != "static_page"'>
<b:if cond='data:blog.pageType != "item"'>
<div style='float:right;margin-right:10px;margin-top:5px;'>
<a expr:href='data:post.url'>Read More</a>
</div>
</b:if>
</b:if>

7.Now save your template and you are done.