I'm sending HTML email through Domino from a PHP app. I encountered an issue where the email did not send at all. Eventually it turned out that the Email class in PHP I was using used a '\n' as a newline character. By setting it to '\r\n' the problem went away.
In other words, HTML emails and new lines are very sensitive. I'm guessing it depends on the OS you are hosting Domino on which one to use.
As for why the 655th character? My uneducated guess is that this has something to do with the MIME encoding of emails, where long content is divided into blocks. It could even be so that Domino is inserting a new line itself and that the space you see is in fact a newline character. Just speculating here :)