I'm testing your news feed source on my test workstation using DNN v4.5.0.  I am connected to a network, using SQL2005, my machine permission are set to High CAS.  No proxy server setup.

Looking at the feed source, I see it is an RSS v2.0 with an included custom namespace newsfeed.  However, the items in the feed should translate with the default xls stylesheet, although only the very basic tags and non-html content will display.  That's the way I set it it initially.

I got the following error msg with the basic setup viewing from a non-authenticated or Admin account:

News Feed Is Not Available At This Time. Error message:The operation has timed out.

Got this message when viewing from a SuperUser (Host) account:

Could Not Connect To http://www.digg.com/rss/index.xml. You Should Verify The Source Address Is Valid And That Your Hosting Provider Has Configured Their Proxy Server Settings Correctly

I tried using a modified xsl that I use to display RSS v2.0 newsfeeds, but still am getting the error you document.  So, still looking for answer, myself.

I know this doesn't help much, but thought you'ld at least want some feedback from someone...