Where / how is the {domain} token formatted?
I believe there are several domain tokens.  domain.Name, domain.Address, domain.email, domain.phone.

These are set on the Administer => Communications => 
Organization Address and Contact Info page.

The only one that I think is required is domain.address.  This has line breaks between the street address and the city, etc.  You can blank out address, the city and remove the zip but getting rid of the country and state may not be possible. (Well if you are in a country without states you can get rid of state)

The {domain.address} is a smarty.  You can do all sorts of things with smarties.  You might be able use regex to replace the line breaks or to remove parts of the address you don't want.  http://www.smarty.net/