nerys, try the following:
take the text file you are working on
paste this at the top:
	Quote:
	
	
		| <!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"><html><head>
 <style type="text/css">
 pre {white-space: pre-wrap;}
 </style>
 </head>
 <html>
 <pre>
 | 
	
 paste this at the bottom
save the file as "filename.html"
and then import the file into calibre and try to convert it.
That should preserve your spacing with a modicom of line wrapping.  If you still get lines run together, you may want to see the "Line Un-Wrapping Factor" value close to or even at 1.00.