Go to the layout menu and click 'Add a Gadget' tab. Click add Feed ie Add content from an RSS or Atom feed to your blog. Add your rss or atom feed url in the feed box.
Your feed will be like this
Replace 'Yourblog' with your blog name. Click Continue.The head lines will be retrieved. Customize the heading to most recent post and click save. You will be able to display upto 5 most recent posts through this method. You can display the 5 recent comments also through this method buy giving the comment feed instead of site feed in the feed box.
This method uses Feedburner and is the one which I generally use in my blogs. It is possible to display first 20 words from the blog post along with the blog title using this method. Go to FeedBurner www.feedburner.com and if you have already burned your feed for the blog, go to the feed and click the publicize tab.
Click the BuzzBoost-Republish your feed as html- tab.
Customize the widget to suit your requirements and click 'activate'. You will get the code which you can add to your blog. The advantage of this method is that it is highly customizable to suit your requirements.