Thank you Tim, I'll give that a try, hopefully that will cure the problem.
In the meantime I also wrote a little Omnimark script to remove the unwanted returns:
;omnimark -sb om_newline_cleaner.om input.txt -of output.txt -log error.txt
cross-translate
;PURPOSE
;The purpose of this script is to remove newlines from PTC Arbortext 6.1 text.
;Script Author Greg MacKenzie
find (">" white-space* "<") => ThrowAway; finds newlines, tabs, and other spaces between tags
output "><" ;removes newlines from in between tag brackets
find "%n" => ThrowAway; all remaining newlines should be in the middle of text or markup, bears checking though
output " " ;adds a space where the newline was