Your version of Office is fairly irrelevant - the issue at hand is that
the rss feeds on an NTLM secured site require whatever accesses the feed
to send NTLM permissions. In the case of a standalone feed reader, this
is a requirement, but not an incredibly difficult one as long as you
don't have a firewall, etc in the middle that doesn't support NTLM. The
issue with the RSS web part is that the web part is a server control,
meaning the server is actually making the request of the RSS feed. This
means authentication falls under the "double-hop" scenario - the browser
client authenticates with the SP web server for the web part, then the
web part must authenticate with the SP list. Kerberos includes
provisions for making these sorts of requests secure, NTLM does not.
The feedreader web part you list does support NTLM, though I've not dug
into exactly how they are doing it, so I can't comment on how
secure/insecure it might be.