Dashboard RSS Widget Overhaul

I edited default-widgets.php – function wp_widget_rss_output () but
it’s still not showing any changes.

There is

NO NEED TO MODIFY CORE FILES!!!!

Especially with dashboard widgets where a very extensible API as been provided by WordPress.

PS: I’m using WPMUDEV Dashboard Feeds plugin. This plugin changes the
widget_options so that I can show my own RSS feed and not the default
Wordpress ones!

You should try getting support for your commercial plugin over at the WPMUDEV forums