I wonder which application writes such an ugly html file. Looks like MS Office from the identifiers...
Anyway, the empty lines are caused by the file content itself. Found pieces like this at several places:
<p class=MsoNormal><span style='font-family:"Arial","sans-serif";mso-fareast-font-family:
"Times New Roman"'><o:p> </o:p></span></p>
These are paragraphs containing a space, i.e. they look like empty lines.
The spaces added before each paragraph are caused by the RenderHTML2Text function since it replaces linefeeds and returns by space characters which IMHO is not always correct. If you don't like this, file a bug report, maybe Juha (who wrote this function) can have a look.