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Outlook doesn't support newsgroups directly. Yes, there is the Go, News menu, but it calls up Outlook Express or Vista's Mail in news-only mode.

There are three programs which support newsgroups in Outlook.

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.

NewsHound is a MAPI service provider that adds full newsgroup (NNTP) support into Outlook. NewsHound 3.0 adds the ability to retrieve messages and threads from Microsoft's web-based forums.This includes forums at  social.microsoft.com, social.msdn.microsoft.com, social.technet.microsoft.com, social.answers.microsoft.com and social.expression.microsoft.com.

More information:

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:

• Limited or no option for header only. Outlook's MAPI transport does not support putting headers into other folders, if you want headers, you may need to leave news posts in your inbox.
• Because of MAPI limitations, you are limited in the number of connections Outlook can have open to a news server to one per server at a time, so one server with 8 groups subscribed will be slow, while 3 servers with 8 groups total will be faster, although not by much as the MAPI transport is traditionally slow. For best results, you'll want to avoid subscribing to a large number of very active groups and not check for new messages more frequently than 15 minutes. Longer is better.
• Outlook's views are not the best for newsreading, you'll probably want to create some custom views to use. My custom view hides read messages and uses automatic formatting to highlight posts I make, so it's slightly easier to find replies, since Outlook can't 'watch' threads like Outlook Express and Mail can.
• Because Outlook's maximum files size using the old format pst (Outlook97 -2002)  is approximately 1.8GB, you need to be alert to your pst size or upgrade to Outlook 2003/2007 and use a Unicode pst.
• Posting or  replying to messages is a bit clunky in Outlook until you get the hang of it, since it uses the Post form to reply. Even if you use Word as your usual Outlook editor, you won't have the full benefit of the spell and grammar checking features of Word for news posts.

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, Mail or Live Mail 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.