I missed your post earlier, JFM... sorry 

To make the topic separate you will need to add ', topicid ' to both of the sql statements, like this:
 topic_title, topicid FROM  
Then change the $topic_title and $topic lines to this:
 $topic_title = $myts->makeTboxData4Show($myrow["topic_title"]); 
        $title = $myts->makeTboxData4Show($myrow["title"]); 
    $topic_id = $myrow["topicid"]; 
    if ((strlen($title) + strlen($topic_title)) > $options[2]) { 
        $title = xoops_substr($title,0,$options[2]+3); 
    } 
        $news['topic_title'] = $topic_title; 
        $news['title'] = $title; 
        $news['topic_id'] = intval($topic_id); 
        $news['id'] = $myrow['storyid'];  
By doing it this way it still uses the preference you set for restricting the length of the news title - the difference being that it uses that setting on topic and title, as one line.
Finally you will need to change the template news_block_new.html 
 Between the foreach lines, put this line:
 <li><a href="<{$xoops_url}>/modules/news/index.php?storytopic=<{$news.topic_id}>"><{$news.topic_title}>a> :: <a href="<{$xoops_url}>/modules/news/article.php?storyid=<{$news.id}>"><{$news.title}>a> (<{$news.date}>)li>  
If you want to add different styles to topic and title, assign a different class to each one, as dionesku outlined above.
If you don't want to have the topic name as a link, then just remove the "a" html tag - look online for html tutorials if you need help with that, there are tons of them and they explain it much better than I can.
Rowd
For reference, here's the whole function:
 function b_news_top_show($options) { 
    global $xoopsDB; 
    $myts =& MyTextSanitizer::getInstance(); 
    $block = array(); 
    $options_new = array_slice ( $options, 3 ); 
    $topicpick = '('.implode ( ',', $options_new ).')'; 
    if ( $options[3] == 0 ) { 
        $sql = "SELECT storyid, title, published, expired, counter, topic_title, topicid FROM 
              ".$xoopsDB->prefix("stories")." , ".$xoopsDB->prefix("topics")." t WHERE published < ".time()." 
              AND published > 0 AND (expired = 0 OR expired > ".time().") AND topicid = t.topic_id ORDER BY 
              ".$options[0]." DESC"; 
    } 
    else { 
        $sql = "SELECT storyid, title, published, expired, counter, topic_title, topicid FROM 
                   ".$xoopsDB->prefix("stories")." , ".$xoopsDB->prefix("topics")." t WHERE published < ".time()." 
                   AND published > 0 AND (expired = 0 OR expired > ".time().") AND topicid in 
                   ".$topicpick." AND topicid = t.topic_id ORDER BY ".$options[0]." DESC"; 
    }    $result = $xoopsDB->query($sql,$options[1],0); 
    while ( $myrow = $xoopsDB->fetchArray($result) ) { 
        $news = array(); 
 
    $topic_title = $myts->makeTboxData4Show($myrow["topic_title"]); 
        $title = $myts->makeTboxData4Show($myrow["title"]); 
    $topic_id = $myrow["topicid"]; 
    if ((strlen($title) + strlen($topic_title)) > $options[2]) { 
        $title = xoops_substr($title,0,$options[2]+3); 
    } 
        $news['topic_title'] = $topic_title; 
        $news['title'] = $title; 
        $news['topic_id'] = intval($topic_id); 
        $news['id'] = $myrow['storyid']; 
        if ( $options[0] == "published" ) { 
            $news['hits'] = formatTimestamp($myrow['published'],"s"); 
            $news['date'] = formatTimestamp($myrow['published'],"s"); 
        } elseif ( $options[0] == "counter" ) { 
            $news['hits'] = $myrow['counter']; 
            $news['date'] = $myrow['counter']; 
        } 
        $block['stories'][] = $news; 
    } 
    return $block; 
}