Can’t help you on the first one. I’ve noticed the same thing, and it has been really bothersome to me because I have had bugs in my HTML that I dearly wanted to fix this way.
I can, however, help you with the second problem. The document does not have <cr><lf> line endings, as PC’s desire. It probably only has <lf> line endings, like Unix machines prefer.
Notepad isn’t smart enough to show you the document nicely anyway. I use Textpad instead. Wordpad sucks because it wants to do all kinds of Word things with your document when all you want is for the funky end-of-line characters to be displayed correctly.
As far as the first problem goes, you could try an alternate browser such as Mozilla Firebird (my new favorite), which doesn’t have that particular bug. Even if you use IE regularly, Firebird is small enough (a few meg) that you can afford to keep it installed for once in a while page source views.