It looks like the story I had. So, here is the way I solved it:
I put the whole path in server’s terms as a custom sitemap file location. In your case it would be something like this (the absolute or relative path) /nfs/c06/h05/mnt/93067/domains/domainname.com/html/news/sitemap.xml (ut looks like the real path to your site’s root, if not? adjust accordingly)
and (URL) – http://yoursite.name/sitemap.xml (replace yoursite.name with actual name of your site)
Try to adjust these string for your site. and run sitemap generation… Hope it will help.
@andrusk: it depends on errors, plugin shows in debug mode.
There is a link on plugin admin screen saying something like debug mode… At the end of generating page you may see the error description. Try this it may help to understand what’s going wrong.