I haven't been following the discussion closely enough to know
if a suggestion for dealing with the problem will be helpful,
but...
I use the SHORTREF feature to implicitly recognize an EMPTY
<newline> tag wherever I want newlines after a start tag or
right before an end tag to be preserved. The parser will
generate the implicit tags which my processing engine then
converts back to actual newlines for output display.
Although this seems like a pain I believe the behavior of
the parser is logically correct and the only way to be consistent.
Michael Leventhal
Oracle Corporation