I'm actually working on something similar (major headlines in a paper anyway). I was planning on scanning a real newspaper and then editing it in Photoshop. Afterwards I would print it out and see how it turns out (I only need closeup shots of the headlines). I'll let you know how it turns out although this may not be what you had in mind...
What I did was very simple. I bought a book of art print paper, which resembles newsprint paper in color and texture. Took the paper out of the book. When folded in half, a single sheet would fit into my injet printer. Used Microsoft Word to write and format the text for the 'newspaper', using a real newspaper as a guide for formatting and layout. Each 'page' in Word was really half of the sheet size (since the sheet was folded.) Printed it out, and it looked pretty good. It was slightly smaller in dimensions than my hometown's daily newspaper, but not enough to cause a problem. I used the finished newspaper as a prop in my short vampire film "Night Watch". I'm working on getting the film online on YouTube or somewhere else. I'll let you know.
Kinko's (www.fedex.com) or similar print services can also help. They have large printers in arsenal. About the contents? I'd probably do it sumaraba's way.
A bit late I appreciate, looking at the original date of this topic, but I just used The Newspaper Clipping Generator and adapted the results for what I needed.