Hi, M.. Newborns spit up, and some spit up more than others. My son spit up what seemed like a lot, but I was told that it looked like more than it is because it mixes with stomach fluids and saliva (spit) in the digestion process. As long as your son is gaining weight, don't worry about the fact that he is spitting up.
Do not wait to burp him every 2 ounces; burp him every couple of minutes regardless of how much he has eaten. You might want to change the kind of bottle nipple you're using, and make sure he always gets a good seal between his mouth and the nipple. Try always feeding him with his head raised a little bit, so that the air in his stomach always rises to the top easily, and that way he burps it out without forcing the milk out with it.
HOWEVER, putting cereal in his bottle or trying to feed him anything except formula at this stage of his life, is NOT good and you shouldn't do it. If you're worried about the fact that he's losing food and not digesting things, then please understand that HE CAN'T DIGEST CEREAL yet. If you want to reduce how much he spits up, then stop feeding him cereal. You can create a lot of problems including overweight, colic, and a lot of sleepless nights by giving him solids too soon.
Change his feeding position, not his formula, unless he's allergic to it. It sounds like you're feeding him the right stuff, but keep his head up. This also helps to avoid ear infections from milk running into his ear canals from the inside.
I hope the spitting up goes away quickly and feeding times are more pleasant for both of you.
Peace,
Syl