The list of system-users is in /etc/e-smith/tests/accounts.conf. There will be a good reason as for why this user "news" is in this list, but if you were to remove the user from this list, you could use the normal procedure to create the user "news". The user "news" is probably intended for being used by a NNTP-server.
My list also contains users that are not really linked to system-accounts: schwern, Bart_Simpson and a group named Simpsons. So the list is already somewhat strange.
As long as you don't intend to run a NNTP-server, I think you will be fine by editing this file and creating the user.
Two more files contain the user:
/etc/e-smith/tests/10e-smith-base/accounts.conf
/etc/e-smith/tests/10e-smith-lib/accounts.conf
But, as always: make a backup before you begin !
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