Hi,
I installed all 1.6 files over the top of the 1.5 files. Then applied the new 1.6 patch on top of that.
Been doing some more testing, and have tracked the bug down to functions.php->prepare_text(). The following line seems to be causing the problem...
$message = preg_replace("/[^\r]\n/si", "\r\n", $message);
To fix it, change the line (95) above to ...
$message = preg_replace"/(?<!\r)\n/si","\r\n", $message);
Thanks,
Alan.