There have been posts on the microsoft.public.expression.webdesigner regarding how to reformat code view. Some of them had to do with CSS and others with the XHTML.

Extra Lines

One report was that additional lines would be added to what existed if a new line was set in the Code Format tab. (Tools | Page Editor Options | Code Format)

To test this I put checked my option settings which are:

My test page started with the code looking like this:

Note that clicking on the image to the right will take you to an image of the full page image and not just the top section. Other sections have blocks of white space between the sections as you see in the head sectoin here.

Reformat HTML

I next applied “Reformat HTML” by right clicking on the menu and selection that option from the from the context menu.

Result

The result was that the page's XHTML was reformatted to comply with my settings in the Page Editor Options for Code Format.

As in the pre-reformat image clicking on the after reformat image will show an image of the full screen of text.

You can see the end result in your browser then using view source.