Outlook doesn't support newsgroups directly. Yes, there is the Go, News menu, but it calls up Outlook Express in news-only mode.
There are currently four programs which support newsgroups in Outlook.
The first program to support pulling newsgroups into Outlook was Newsgator. It's great if you monitor newsgroups and don't post back. There is a Newsgator plugin that allows you to post to newsgroups from Outlook, but it's not really up to news posting standards.
NewsLook is one answer to everyone's favorite request for Outlook--newsgroups in Outlook. NewsLook adds NNTP support to Outlook, allowing you to read and post to one or more news servers. This COM add-in uses CDO and NET framework to pull newsfeeds into Outlook.
Mapilab's answer to the request for newsgroups in Outlook is in the form of an NNTP transport, rather than a COM add-in. Use it with Outlook 2000 (Corporate/workgroup mode) and Outlook 2002/2003 to read and post to UseNet servers.
A new addition to the growing list of newsgroups-in-Outlook add-ins, NewsHound is a MAPI service provider that adds full newsgroup (NNTP) support into Outlook.
Outlook will not be as efficient for newsreading as Outlook Express or any other newsreader. It lacks a number of features you'll find in a real newsreader:
My recommendation? As bad as Outlook Express is, Outlook as a newsreader is worse and it's quite clear why Microsoft choose not to invest time and effort into making Outlook 'do news'. The MAPI transport just has too many limitations but is required to provide connectivity for Exchange server.
There is no danger Outlook going to replace OE as my preferred newsreader. There are a few newsgroups I like to have in Outlook though and I use NewsGator to pull in groups I read but don't post to and MapiLab's NNTP for Outlook for a few groups I read and post to. I use NNTP for Outlook for reading newsgroups on several private servers where I only subscribe to a couple of groups per server.
Finally, I use OE for the Microsoft news servers because I read and post to more than 6 groups per server, many of which get as many as 1000 new post per day. I need the ability to watch threads and the better view options help me work faster.
Update for Outlook 2007: If you use these add-ins and subscribe to many groups or some higher volume groups, Indexing may seem to be never-ending, with the hard drive constantly churning. Store the NNTP posts in a separate PST and disable indexing on it or reduce the number of groups you are subscribed to and the frequency to which you check for new posts.