Removing newlines in source

I am having problems with newlines being removed in the source.
For example if a user enters:
--------------------------
<SCRIPT language=JavaScript type=text/JavaScript>
<!--
//test
alert('hello world');
//-->
</SCRIPT>
-------------------------
It is saved as all one line:
-------------------------
<SCRIPT language=JavaScript type=text/JavaScript><!--//testalert('hello world');//--></SCRIPT>You should get a hello world alert
-------------------------

Are there any ways to prevent this?

Thanks,
Chad