The first thing to take into account is DNN validates news feed elements by using a defined schema.  You can view the file with a text editor, download the News project source and you will find it in the folder: \RSSToolkit\Resources named Rss20.xsd.

Within that schema is a datatype defined for email addresses:

 <xs:simpleType name="tEmailAddress">
  <xs:annotation>
   <xs:documentation>Using the regexp definiton of E-Mail Address by Lucadean from the .NET RegExp Pattern Repository at http://www.3leaf.com/default/NetRegExpRepository.aspx</xs:documentation>
  </xs:annotation>
  <xs:restriction base="xs:string">
   <xs:pattern value="([a-zA-Z0-9_\-])([a-zA-Z0-9_\-\.]*)@(\[((25[0-5]|2[0-4][0-9]|1[0-9][0-9]|[1-9][0-9]|[0-9])\.){3}|((([a-zA-Z0-9\-]+)\.)+))([a-zA-Z]{2,}|(25[0-5]|2[0-4][0-9]|1[0-9][0-9]|[1-9][0-9]|[0-9])\])"/>
  </xs:restriction>

Looks like any special character in the email is going to be thrown as an error.  The error message you posted shows special characters in the 'real name' portion of the email address.

The next consideration is you really can't compare results with other news readers or browsers with DNN's News module.  All implementations have their own custom methods of sanitizing, transforming, and presenting a news feed.  It's not as easy as it sounds, there's a lot of background work that takes place to take a feed and make it available to a DNN site.  Not all news providers of feeds follow the rules of their stated specifications, which is a requirement to safely present a news feed, especially in the context of what DNN's News module it attempting - to be able to provide a news reader that aggregates and presents news feeds from disparate feed formats.

The feed will not translate to a valid RSSv2.0 format, and as such will not work in the module.  There is nothing you can put in the modules setup 'Add Feed' area that will fix it.  The feed itself is the issue.  The News module needs to translate an incoming feed to something consistent, namely a 'DNN RSSv2.0 feed' to be able to display feeds that may be combined with other feeds that may not be in the same format.  Due to the need to provide the resulting output in a standard format that can be presented using the provided xsl files.  Peter, relaxed some of the validation to accomodate the pubDate element in feeds, which was found to be causing a lot of issues, and I think he even changed the regexp for the email datatype.  However, I think it's pretty tough to provide a solution that works for every feed and format being used. Again, not all news feed providers follow the specs and deliver compliant newsfeeds.

I'm not sure why you can't find the source code for it, as that's all I did was download the source for the project and extract it to a folder on my workstation.  Make sure you downloaded the 'source' version and not the 'install' version.  Then, take a look in the zip file, and you'll see another zip file called 'Resources.zip', that's the file with the actual source code.  Unzip that file and extract it, or list it in WinZip, and you should see the xsd file Rss20.xsd. 

I guess, if you wanted, you could modify the xsd and recompile the code to 'relax' the validation for the email datatype, but you would be on your own, and have to do it with every news module update.  That's not the approach I'd take or recommend, yes it can be done, and I actually did that for a client, but it makes my client dependent on a resource to fiddle with the code when they want to upgrade.  So, the question is - how critical is this feed to present on your site?  If it's pretty important, the easiest approach is to use the XML/XSL module with a custom xsl.  Otherwise, you'ld have to change the xsd's definition of the email datatype and recompile the solution, moving the new dll to the sites bin folder.  Any course you take requires care, though, test your approach on a Non-Production site first.

Hope that sheds a bit more light.

Cheers