You don't mention which version of DNN you are using, so there may be some twists I have not seen in your issue. I just downloaded and installed DNN v04.05.05, added a NewsFeeds (RSS) module, and used your link as the news source. It comes up fine, with the excpetion of some expected presentation issues in the feed itself. The Yahoo feeds include HTML, which the default xsl translation does not convert. Otherwise, I had no issue with the feed and did not get the error.
Now, I've seen this type of thing happen due to some machine setup issues with Code Access Security (CAS), but don't know if that's the source of your issue or not. I'm testing through a pretty strict environment, no proxy, but the security of the outgoing web requests, and incoming results are not under my control, as it's handled by our network security group. So, don't really know if you are experiencing issues due to machine security, site security, or just what. Let us know what kind of environment you are using, and someone with a similar setup may be able to zero in on a possible solution.
FYI - I've got WinXP Pro, running SQL Server 2005. The installation of DNN was setup per default, with the only changes made to the web.config being the connection strings.