Something I don't think anyone mentioned (I only read part way down, maybe 1/3 or 1/2 way), was that giving cereal to a baby too soon (before 4-6 months) is a risk factor for diabetes. So I would definitely stop the rice cereal, whatever you do. I really think starting later is better. My daughter was 5 months 3 weeks when I started her on solids, and she ate like a trooper (more went down the hatch than came out on the first meal!). Formula fed babies usually sleep through the night sooner and longer than breastfed babies anyhow. Don't complicate things for your baby's digestive tract!
As to the spit up, how often are you feeding him? My son used to spit up after almost every feeding. When I spaced his feedings out a bit, he spit up less. If I nurse too close together, he spits up more. Some babies just spit up more than others. My doctor told me it means that he ate too much and he's just getting rid of the excess--at least in my case, since he was gaining weight VERY well. I learned to have a burp rag handy.
Now, at 5 months, he burps up less--especially if I don't feed him too soon. This morning we had a 2 1/2 hour gap between feedings instead of the usual 4 hours, and he burped up more than usual. But if I stick to the 4 hours gap, he is fine. Of course, 4 hours is too long for a 2 week old baby! Preemies are fed on a 3 hour schedule, and since you're formula feeding, I would say 3 hours apart is probably fine. Unless he is acting hungry before 3 hours, I would try spacing the feedings out as long as possible (but not longer than 3 hours during the day; longer stretches at night are okay).
See if that doesn't help. :) If not, you have a visit in a few weeks anyway, right? If it hasn't gotten better by then, ask his ped.