Line feeds are not used when you send an e-mail message that uses an e-mail template to render data that has line feeds in Microsoft Dynamics CRM 4.0

Problem
When you send an e-mail message that uses an e-mail template to render data that has line feeds in Microsoft Dynamics CRM 4.0, the line feeds that are included in the data are not used. Instead, the data in the e-mail message is concatenated together. The data does not appear on separate lines.

For example, you create a contact type e-mail template that contains the {!Contact:Description;} code. When you try to send an e-mail message that uses the e-mail template for a contact record, the e-mail message should display a description as follows:

Line 1
Line 2
Line 3

However, the e-mail message displays the description without line feeds, as follows:

Line 1Line 2Line 3

This problem occurs if the e-mail template renders data that merges the nvarchar data type and the ntext data type.

Reason
This problem is fixed in the latest cumulative update rollup for Microsoft Dynamics CRM 4.0.
Important This section, method, or task contains steps that tell you how to modify the registry. However, serious problems might occur if you modify the registry incorrectly. Therefore, make sure that you follow these steps carefully. For added protection, back up the registry before you modify it. Then, you can restore the registry if a problem occurs.
Install this cumulative update rollup on computers that are running the Microsoft Dynamics CRM 4.0 server components

Use the following registry keys(DWORD) to enable the fix:

• On the Microsoft Dynamics CRM Server, locate the following registry subkey:
  SOFTWARE\Microsoft\MSCRM\SDKEmailTemplateHTMLLineBreak = 1
• On the Microsoft Dynamics CRM client for Outlook, locate the following registry key:
  SOFTWARE\Microsoft\MSCRMClient\SDKEmailTemplateHTMLLineBreak = 1

ref: http://support.microsoft.com/kb/955452

thanks,

yes.sudhanshu