jEditable Unexpectedly Strips Newlines from Display in IE

jEditable Unexpectedly Strips Newlines from Display in IE

I'm using jEditable to allow users to edit content in a PRE block.  But IE7 and IE8 are failing to honor newlines (\n) and instead smashes all the content into a single line.  It works fine in FF, Safari, Chrome but fails in IE.  Has anyone else seen this behavior?  Why would the newline characters get stripped?

Code Sample:

jQuery('.edit').editable(function(value, settings)
{
      //nl2br
      html_val = value.replace(/\r?\n/ig, '<br/>' );
      return html_val;
},
{
      type : 'textarea',
      height : '120',
      cancel : 'Cancel',
      submit : 'Save&nbsp;Changes',
      indicator : '<img src="/images/indicator.gif">',
      tooltip : 'Click to edit...',
      cssclass : 'inherit',
      onblur : 'submit'
});