I discovered the same problem. Breaks were being inserted into a list of links. The breaks defeated the styling of the links (float left with interspersed breaks is a vertical column, in my case).
I went into the database table wp_posts and manually removed the line breaks. The very next display reinserted them.
I found that wpautop($content,$br) with $br=0 is supposed to halt the insertion of breaks, but I cannot find a way to set the site globally to do this. I am hesitant to make hard-wired changes to the core of wordpress.
Pointers to where I can set the global for wpautop would be appreciated.
