I'll follow this thread with interest, as I may be taking another look at FM for DITA soon.
Anecdotally, and if I've read you correctly, I can mention that my usual DITA environment behaves much the same way: no problem with the WYSIWYG view, but as soon as I change to Code view the lines are ruthlessly chopped up. Sometimes, to make it even odder, it will show an end tag and the next start tag on the same line. I'm assuming this is a quirk of the text editor component.