This post was a pain to type because the forum uses an HTML editor as well. Where I have typed something like < br > < b >, it should read without the spaces.
I'd argue that what you see is the expected behaviour. In HTML ASCII(10) or LF does not mean start a new line, < br > does
http://www.w3schools.com/tags/tag_br.asp.
So I suspect you would have to do a search/replace of the CR/LF characters with < br >.
You would also have to be careful where other HTML markup occurs innocently in your plain text. < b > would have the effect that everything followed would be bold. Refer to something like this
http://www.w3schools.com/html/html_entities.asp. on how to reference those.
As you said, not a trivial exercise, but not impossible
The other thing I'll mention seen you had a screenshot with the GDC. There is a warning hidden away in the docs right at the bottom here
https://4js.com/online_documentation/fjs-gdc-manual-html/User/NewFeatures222.html. (Im surprised the arning isn't more prominent) The GDC library we use creates a lot of unnecessary HTML tags which make life interesting when you view the resultant HTML either in GWC or send it through to GRW. In 2.50 in FGLDIR/demo/WebServices/richtextmigration there is a program to help standardize the html coming out of the GDC richtextedit.