Written and contributed by Dugge.
Original forum thread:
http://forum.nucleuscms.org/viewtopic.php?t=7630
NOTE:
This tutorial assumes you have already configured fancy urls to work on your Nucleus installation.
Your average RSS file looks something like this:

Notice the code/url in this format:
<link>http://www.hobbyman.se/index.php?itemid=10</link>

You should now see a screen that looks like this:

There are lots of parts to the template, but we're going to concentrate on the "Item Body" template part. This is the code we are going to replace to get fancy urls to work in our RSS feed. This is the code in the "Item Body" section:
<item> <title><%title(xml)%></title> <link><%blogurl%>index.php?itemid=<%itemid%></link> <description><![CDATA[<%body%><%more%>]]></description> <category><%category%></category> <comments><%blogurl%>index.php?itemid=<%itemid%></comments> <pubDate><%date(rfc822)%></pubDate> </item>
Replace that whole section of code with this code:
<item> <title><![CDATA[<%title%>]]></title> <link><%blogurl%>item/<%itemid%></link> <description><![CDATA[<%body%><%more%>]]></description> <category><%category%></category> <comments><%blogurl%>item/<%itemid%></comments> <pubDate><%date(rfc822)%></pubDate> </item>
Click on "Update Template" to save your changes:

Your updated RSS feed should now look like this. Notice this code/url once again:
<link>http://www.hobbyman.se/item/10</link>