gcastillo,
Here is my take on this.
At first you were getting nothing. That was because you didn't have the .shtm or .shtml extension. Then you corrected the extension, but now you get the error message "SSI not being processed". In a way this is good because it shows you have started in the right direction. You are getting that error message because now the existance of a SSI file is being recognized, but the server just can't find the file.
The first question is "why can't the server find the file?"
Possible answers:
1)The path to the file may be incorrect.
2)The path to the file is correct, but not relitive to where it is being called from.
For example, is the .shtml file that contains the include in the root directory, or in a sub directory? Using your example above, if the .shtml file calling the include is in the "root directory" and ="/ssi/news.htm" is the correct path, try "ssi/news.htm" without the beginning backslash.
If the .shtml file that contains the include is in a sub directory like "here/thewebpage.shtml", then you would need to use "<!--#include file="../ssi/news.htm" -->" for it to find the include file from the HTML file stored in the directory named "here". The only problem then is that the include file would be found, but the include file itself would not find images or other paths contained within itself. Because the include file would be looking for things from within the "home directory" rather that the root directory where it's own paths are correct.
I know my explanation sounds confusing, but take some time to digest it. The most ideal way for SSI to function is when all the .shtml / .shtm files are in the same place, and all call the include files from the same place.
Good Luck.