I am finally starting to figure out how to theme Simplenews and it seems to be working. Kind of. However, I have yet to figure out how to change the structure of the document. For now, the nodes I include in my newsletter are sent as a title in a paragraph tag, a teaser also in a paragraph tag and a 'read more' link. I need the title to be in an H2 tag... where can I change this?
So basically to achieve the desired result (for a Drupal 6 site), I used the following modules:
In simplenews' directory, there is a sub-directory called themes which contains several template files including a body template which allows you to theme around the newsletter content.
Also, for each node, simplenews content selection's default output is a title, teaser and 'read more' link. I just want to add that to change simplenews content selection's default format, there is a file in the module directory called scs.theme.inc and under 'function theme_scs_node_output' you can list which fields to use. This was one of the most critical issues to me because my client wanted the information to display in a specific way.
Finally, just a quick reminder: theming for email newsletters should be done in table layout for best results, and all styles should be inline.
If anyone has a more complete or accurate answer, I'm happy to select theirs instead.