firstname.lastname@example.org very helpfully documented the odd behavior Outlook shows when dealing with line breaks in a most useful manner:
"Every message starts with continuation off.
Lines less than 40 characters long do not trigger continuation, but if continuation is on, they will have their line breaks removed.
Lines 40 characters or longer turn continuation on. It remains on until an event occurs to turn it off.
Lines that end with a period, question mark, exclamation point or colon turn continuation off. (Outlook assumes it's the end of a sentence?)
Lines that turn continuation off will start with a line break, but will turn continuation back on if they are longer than 40 characters.
Lines that start or end with a tab turn continuation off.
Lines that start with 2 or more spaces turn continuation off.
Lines that end with 3 or more spaces turn continuation off.
Please note that he tried all of this with Outlook 2007.
So if possible, you can end messages with a sentence-terminating punctuation mark, or even a tab."
Big yourself up mtruesdell this has been doing my head in the last 2 hours!