You may need to use one of the following configuration parameters:
// Don't remove line breaks
'remove_linebreaks' => false;
// Convert newline characters to BR tags
'convert_newlines_to_brs' => true;
WordPress passes an $init
argument array to TinyMCE that sets the opposite value for each of these parameters.
I assume you can pass them directly in your wp_tiny_mce()
argument array, but I’ve not tried; I pass them as array parameters for a custom filter of the TinyMCE $init
array.