As far as I know, there’s no way to do it directly through the GUI, but there is a file you can edit quite easily. The file ~/Library/Safari/Bookmarks.plist contains all of the Safari bookmarks, including those saved to the Reading List. (For whatever reason, this file gets borked in TextMate, among others, but TextWrangler seems to cope just fine).
Anything beginning <key>ReadingList</key> is an item saved to the Reading List. There are two entries that control the title and the description. The first will be of the form:
<key>PreviewText</key>
<string>No preview available</key>
This occurs about six or seven lines in. Change this, and the description changes. The second entry is of the form:
<key>title</key>
<string>http://arxiv.org/pdf/1111.1763/arxiv.org</string>
and you can imagine what that does.
This procedure worked for me in Safari 5.1.1 in 10.7.2; I presume it should similarly work for you.
Two caveats: I have no idea what this might do to an iCloud-synced reading list. If the edit doesn’t get marked with the appropriate edit date, there could be some weird sync conflict brouhaha and Safari might explode. Also, I quit Safari while I messed around in Bookmarks.plist. No idea what might happen if you leave it open; probably nothing. But y’know. You can’t be too careful.
This is an example full entry for a Reading List item in Bookmarks.plist.
<dict>
<key>ReadingList</key>
<dict>
<key>DateAdded</key>
<date>2012-11-29T23:30:55Z</date>
<key>DateLastFetched</key>
<date>2012-11-29T23:30:55Z</date>
<key>PreviewText</key>
<string> **This is the short description** </string>
</dict>
<key>Sync</key>
<dict>
<key>Key</key>
<string>”C=1234567890"</string>
<key>ServerID</key>
<string>https://example@example.com+ABCDEFG12345</string>
</dict>
<key>URIDictionary</key>
<dict>
<key>title</key>
<string> **A web page that I’ve saved** </string>
</dict>
<key>URLString</key>
<string>http://www.example.com/readinglist</string>
<key>WebBookmarkType</key>
<string>WebBookmarkTypeLeaf</string>
<key>WebBookmarkUUID</key>
<string> 1234567890 </string>
</dict>
You have to remove an article from the reading list to purge the contents.
I suppose there is an implied storage limit since you would run out of space on a device once the cached pages exceed the local storage capacity and/or the capacity of iCloud to manage the content across devices.
I haven't tested it, but iOS has the ability to mark some content as cloud backed / temporary and these articles might get culled if you reach a low storage watermark on iOS, but I've never witnessed that happen even on devices where I've run quite full.
Best Answer
Right-click on an item in the list and choose Clear All Items.
Reading List is not a list of sites you previously listed, but rather a list of sites you specifically added to the list using the + button to the left of the address bar.