For the year in which the employee enters the plan, plan defines compensation from date the employee became a participant. However, employer has allocated 2003 contributions based on such employee's comp. for the entire plan year. Correction - forfeit the excess amount contributed (plan reduces)? Any possibility of an amendment changing the comp. period to the entire year for first year of participation?

I think you would have no trouble having the IRS approve such an amendment via EPCRS. Unless, by fluke, you have been adding new participants that were predominantly HCE's.