Save the document and then re-open it in Notepad.
The carriage return (CR) and line feed (LF) are created with a new line in Windows text files, and both characters are needed to make text files compatible with old dot-matrix printers that had to be told to feed the paper. The CRLF has created all kinds of problems because sometimes these two invisible characters get unjoined.
Since XP, Notepad sometimes adds an extra CR when the editor is in wordwrap mode and the document is saved; wherever the line wraps, a CR is put in. This creates a new line in the editor, which you can see when you change the client's size or edit existing lines. However, this problem is only visual, and the document is not saved with the extra CR.
To solve the problem, simply save the document then re-open it in Notepad and it should look fine.
One last note: this is not merely a painting problem but a problem with the text in the buffer, so copying the text to another editor does not solve the problem.