It seems that contrary to the docs, nl2br doesn't replace returns with <br/>, only with <br>.

Give it a try with:
print htmlspecialchars(nl2br("line1 \n line2 \n line3"));

If you're looking for XHTML compliance, use:

function nl2br_xhtml($text) {
	return str_replace("<br>", "<br />", nl2br($text));
}

rgds,

Matt

My config command:
'./configure' '--prefix=/usr' '--with-config-file-path=/etc' '--disable-debug' '--enable-pic' '--enable-shared' '--enable-inline-optimization' '--with-apxs=/usr/sbin/apxs' '--with-exec-dir=/usr/bin' '--with-regex=system' '--with-gettext' '--with-gd' '--with-jpeg-dir=/usr' '--with-png' '--with-zlib' '--with-db2' '--with-db3' '--with-gdbm' '--enable-debugger' '--enable-magic-quotes' '--enable-safe-mode' '--enable-sockets' '--enable-sysvsem' '--enable-sysvshm' '--enable-track-vars' '--enable-yp' '--enable-ftp' '--enable-wddx' '--without-mysql' '--without-oracle' '--without-oci8' '--with-xml'