The news generator plugin is looking for a file that is probably there on the server, but in the wrong place.
When you see the word 'upload' in a punBB URL, it suggests that the forum hasn't been installed properly and therefore many punBB files may be in the wrong place. Check that you copied up all the punBB files into the right location.
In a normal punBB installation, there is NO upload folder. You copy the files FROM the 'upload' folder of your unzipped punBB file INTO the root of your proposed forum folder on your web site. You don't copy the 'upload' folder and its contents onto your web site.
See: http://punbb.org/docs/install.html and http://punbb.org/docs/video_tutorials/ for more info on installation.
Also check the values you are using for the locations specified in the plugin, eg those like:
// The forum from which we'll pull the news bits
$forum_id = 3;
// Number of news posts to include in the index
$num_posts_index = 5;
// Path to news item template
$template_path = PUN_ROOT.'plugins/news_generator/news.tpl';
// Directories in which plugin will save generated markup (must end with slash)
$output_dir_latest = PUN_ROOT.'plugins/news_generator/';
$output_dir_archive = PUN_ROOT.'plugins/news_generator/archive/';