If you View Source while the file is online, are the line breaks still there? That narrows it down.
Start by checking the settings in your ftp program. A quick look at Fetch, for comparison, tells me that there's a Preference setting under Downloads for line-ending format. In Windows, you need to use CRLF or \r\n. It will probably just say "Windows or DOS format" as opposed to "Unix format". There are even some special line-break markers within unicode, but I doubt those are your problem.