So I made a bit more of investigation as this issue got a bit disturbing for me 
I have created a new list (it is built from 1 additional column, that is Multiline and called "Multiline_rows" and is a "Plain text" field):

I then created a list workflow (exported file in the attachment). It is replacing the "#" character in a string with a newline.
The workflow is updating the list item's field "Multiline_rows" with the replaced string (either by using simple insert of the variable and via the "Advanced Lookup" choosing "Description Text"):

In both approaches, the replaced string displays as a single line when I go into a list:

However both when using a "Quick edit" as well as when editing the item itself, I see that the operation of replacement did its job properly (there are <br>'s inserted):


Also, when looking at my e-mail via the browser version of the Outlook, string is displayed in multiple lines (again, for both ways of inserting a variable into a body):

So what's wrong?
It seems that the reason is related to the interface of the application/ SharePoint. Be aware, that at first I displayed the list using the new SharePoint Look&Feel. And it showed the string in a single line.
HOWEVER when I switched the view to the "Return to classic SharePoint"

contents of the list respects the new lines:

So what I can say is... Depending on which application/ using which SP interface you are using to view the data, it does respect the multiline formatting or not and.. frankly speaking I doubt if you can do anything about that 
Regards,
Tomasz