The sills on my house are made of 8 by 8 timbers, and I just noticed that there is some rotten spots in areas. Should these be cut out and replaced or are there other ways to fix this problem? The rot is only into the wood by about 2-3 inches on the bottom.

It depends how bad it is and whether there are insets spreading the problem too.

Do a google search for Abatron
http://www.abatron.com/home002.htm

and for boracare

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