What is causing formatting to break?
You are using using filtered html (Text Format).   [As per your screenshot above]

Filtered HTML only all the following HTML tags


Web page addresses and e-mail addresses turn into links automatically.
Allowed HTML tags: &lt;a&gt; &lt;em&gt; &lt;strong&gt; &lt;cite&gt; &lt;blockquote&gt; &lt;code&gt; &lt;ul&gt; &lt;ol&gt; &lt;li&gt; &lt;dl&gt; &lt;dt&gt; &lt;dd&gt;
Lines and paragraphs break automatically.



  You need to change text format to FULL HTML if you wish to retain all HTML formatting


As a best practice Full HTML use should be limited