This just in: User:JRM hops over from Wikipedia after showing an editor how to edit main pages of Wikimedia projects. Not being a reporter, he is unlikely to become a valuable contributor, but he will always be ready for gruntwork.
I think Wikinews has great potential. We scooped the crisis in Belize: we had facts and pictures hours before the major news agencies did, courtesy of one dedicated Belizean Wikipedian (User:Belizian). As we get more and more contributors from around the world, we can expect our wiki nature to give us more and more scoops.
We need to be more aggressive at wrestling breaking news away from Wikipedia. People have been contributing to "Current events" for so long that this habit will be hard to break, but we must, or both Wikinews and Wikipedia will suffer as a result. The Belizean unrest had a far better Wikipedia article (w:2005 Belize unrest) before it had a Wikinews article, and even incorporated live facts reported on the scene. Wikinews has started off at a disadvantage, obviously, but there's no reason why we shouldn't simply copy and even remove things from Wikipedia where appropriate.
Wikipedia's "in the news" should be for putting into encyclopedic context well-established news facts from reputable sources. Ideally, Wikinews should be the reputable source developing the news. Wikinews should ideally have all the news first. Then the Wikipedia article (if the event deserves a new one) should follow. Because of the actuality, this requires a large number of dedicated people, and some restraint on behalf of the Wikipedia contributors, but I think this is ultimately where we're headed.