The space you see is indeed a new line. Domino seems to remove the character ("p" in this case) and replace it with a space AND a new line (which is ignored by HTML rendering, so you just see a space).
Why not every 655th character though? If you send a line of HTML with a length 2000 characters it will split it in to two lines -- one of 655 characters and a second line of 1355 characters. You'd expect it to produce 4 lines, no? Very weird.