My Joomla sites are all running PHP5 and the newsfeed component works for me. Most people don't check the RSS syndicated portions of their site often though, and I stopped using it once I found out about some trickery. More and more often people have begun embedding their own adsense ads in their site feeds, which result in displaying ads for them with their adsense publisher ids.
While I don't have a problem with these people feeling that their content is of some value that they should get paid for, I do also have adsense ads on my own site. Displaying my 2-3 ads blocks with the 2-3 embedded in their content, means that I was in violation of the Google TOS all of a sudden. I am obviously not comfortable making a profit for them, when it could result in me getting banned from the program. Jason Calacanis pioneered this technique and has become the Adsense Million Dollar man, turning over $2300 a day in revenue from his ads. Read more about it here: http://www.google.com/search?hl=en&q=google+adsense+million+dollar&btnG=Google+Search
You should look into the FeedGator component instead, which I have started using. It lets you register news feeds, but it parses them and creates the items as actual Joomla articles on your site that are assigned to your sections and categories. You can set this up to run as a scheduled process so your content is just as up to date as it would be when using news feeds with caching. It's just a little bit buggy in that it doesn't seem to deregister the feeds properly, but you can easily do that by manually removing the record from your database through phpMyAdmin.
The component is a freebie from Phlooid.com and is available here: http://phlooid.com/joomla_downloads/Download/JoomlaComponents/FeedGator(Currentversion:0.4)