This is an extension from this thread. It appears that the template parser adds carriage returns based upon the bbcodes being used in the original template. This should be fixed so that carriage returns in the HTML of a bbcode are NOT parsed as actual carriage returns by the Template bbcode processor.
This is due to the order in which VaultWiki parses line breaks. This was an intentional change in version 2.x in order to fix bugs in vBulletin's parser, but which resulted in inconsistent behavior. This is a duplicate of this issue: http://www.vaultwiki.org/issues/1277/ which is being addressed in the next release (RC 2).
In the mean time, you can temporarily fix this by stripping the line breaks from the HTML portions of your custom BB-Code handlers.
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