First, you need to understand that v03.01.01 is using a default translation file (xsl) to parse the newsfeed you are reading. By defaults that version uses a simple xsl file to do the work. It's located in the /DesktopModules\News folder and named: RSS91.xsl.
Generally, to customize a newsfeed's output, you need to use a custom xsl file. The trick is understanding your source rss news feed, as every one is a bit different.
You can copy the default dnn xsl file, then open it up to modify it to suit your need. Save the new file, then upload it to your portal. When you place a RSS News module specify the newly created xsl file as the translation file.
To illustrate the process, I used the DNN news as a source, then used the following xsl to translate it, limiting the display to 3 items. If your source generates sorted items by descending date, you are in business. If not, you need to do a bit more with xsl.
A basic shell for displaying only 3 items can be done with this code:
<?xml version="1.0"?>
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
<xsl:output method="html" indent="yes"/>
<xsl:param name="TITLE"/>
<xsl:template match="rss">
<!-- Do not show channel image -->
<xsl:for-each select="channel/item">
<xsl:if test="position() < 4">
<br>
<strong>
<a href="{link}" target="_main">
<xsl:value-of select="title"/>
</a>
</strong>
<br></br>
<!-- only display markup for description if it's present -->
<xsl:value-of select="description"/>
</br>
<br></br>
</xsl:if>
</xsl:for-each>
</xsl:template>
<xsl:template match="description">
<br>
<xsl:value-of select="."/>
</br>
</xsl:template>
</xsl:stylesheet>
Note the highlighted lines are the ones used to limit the display to 3 items.