Of course it only make sense to generate blogrolls within Google reader - you list the blogs you read in your reader. Google reader has clips to allow you to list the feed items, but not just the source as in a blogroll. Now the Google blogroll is a slight modification of the clips, in turn is just some particular display of a feed.
I have already done a very flexible feed displayer a couple of months ago. One use of it is for blogrolls generated from Google reader. It's a lot more flexible because it's a client side script, it's a couple of months ahead too.