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Solved! Go to Solution.
The Email widget only respects newlines if you type out the Body portion and have them there. If, like me, you need to have the Body be a field because it's constructed in the flow, you need to make sure your field has <br /> tags in it to get newlines.
If your "fullBody" formula is something like
[body1] + "
" + [body2] + "
" + [body3]
It will look OK in a preview, but passing this to "Body: Use a field" in the Email widget will turn the newlines into spaces in the HTML formatted message.
If you want to pass newlines into "Body: Use a field" your fullBody formula would need to be
[body1] + "<br />"
+[body2] + "<br />"
+ [body3]