First, rip up newspaper into 1-2 inch squares. Cutting would work too, but ripping preserves the natural strength of the paper fiber.
Soak in hot hot hot water. You should have enough water to completely cover the paper.
Next, blend the crap out of it. Depending on how much you are making, use a mixer attachment on a drill or a blender - something that will really agitate and cut the paper up.
The paper should break up into a brain matter gray blob.
As you are blending, add a strong adhesive into the pulp. Ideally, you want methyl cellulose glue. I didn't have any, so I used wood glue - the Gorilla brand wood glue was the best. I didn't measure, but I would say I used at least a cup for 2 gallons worth of pulp.
Once the pulp has broken down and the glue is completely mixed in you can strain off the water and use as desired!
The water content of the pulp is completely up to your taste. The drier it is the rougher the texture, the more watery, the smoother the texturer.
Apply in layers of about a 1/4 inch at a time, letting each layer dry out.
It takes forever to dry - under fans over night.
Once it is dry you can sand, carve into, and paint as desired!