Masonry is being called before your ajax request completes. The script should run after all of your items are created in the DOM. You can do this by adding it inside the 'complete' property of ajax(). Also, a columnWidth should be specified.
So, in your demo page, you'll want to move lines 19-25 down to line 33 of your code like this:
jQuery(function () {
$.ajax({
url: 'http://www.sagittarius-digital.com/news.rss',
dataType: 'xml',
complete: function() {
/* Init Masonry */
var msnry = new Masonry( container, {
// options
gutter: 10,
itemSelector: '.item',
// Add a column width
columnWidth: 50
});
}
})...
Also, be sure not to leave out the comma after the dataType property.