There is nothing worse than trying to read badly formatted ebooks!
Any chance you are using Calibre as a library manager for your e-books? If so, you could try converting your txt files to another format (or even back to txt). If they are formatted like a Project Gutenberg txt file, Calibre should do a pretty good job of getting rid of the breaks at the end of each line, while preserving the paragraphs, just by using the default conversion settings. You could even try converting the ePub back to ePub to see if it will fix the problem you were having with that file.
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