You'll fight a few of Yuan Shu's lackeys before you get to him in the northeastern cave (of Xuzhou). He's with Ji Ling, Yue Jiu, Lei Bo and Zhang Xun. Yuan Shu himself is much tougher than he was in DoaE, as his strength is 190 instead of 142. However, this is so early in the game that it's an easy battle, although if you didn't take Lu Zhao and Zhu Ling from Cao Cao it might be a bit more difficult. Yuan Shu should be taken out first, and his army will crumble after that.
Romance of the Three Kingdoms III : Int. 67 – Pol. 61 – War 79 – Chrm. 53 – Army 71 – Navy 63
Lord Yuan Shu is a unique character in this game, as he has the opportunity to formally claim himself as Emperor (look above). He is available for use as a ruler in both 189 and 194. While not the best ruler to be, he is generally pretty competitive. Generals Ji Ling and Zhang Xun are solid, and his force is always loyal to him. However, the people of Wan tend to disprove of his actions time and time again, and often rebel.
Thanks to the Three Kingdoms novel and to Slickslicer for the historical info.