Your feeds would be generated just as your HTML pages are generated, after each request. But instead of outputting HTML it would be outputting RSS.
I probably would not make a file for each feed but it sure is possible. A better approach may be to pass a variable via GET or POST to your page generating the RSS and grab the data that pertains to the variable passed. You most likely can use the same logic you use for generate your HTML news lists if you isolate your code well.
I would also take a look at the article posted by Raj. It looks like C# has a nice namespace (System.ServiceModel.Syndication) that contains some objects that make the job pretty easy.
Have fun!
Nick