Hi Ville -
Six months later, I have an answer to your question. :) I was looking for a solution to this myself, and a search of the forums didn't come up with anything except this post, so I went into the code. In /wp-includes/links.php, at the bottom in the get_links_list function, the before, after, and between fields are not called from the database on lines 486-488, and then on about line 507, those items are hardcoded when the call is sent to get_links, and what is hardcoded for between is just a newline (\n). There are two ways to fix this:
1. a) Add the three fields to the SELECT so they're picked up for the fuction. Lines 486-488 would probably become:
SELECT DISTINCT link_category, cat_name, show_images,
show_description, show_rating, show_updated, sort_order,
sort_desc, text_before_link, text_after_link, text_after_all, list_limit
b) then, list those three database items in the call to get_links, so line 507 changes from:
Then the call to get_links should properly pull those settings from link categories.
The other, fast cheap and wrong (but the way I did it) way to do it, is to just hardcode that BR tag into line 507:
or of course br \ if you're doing that xhtml thing.
Dougal wrote this function originally so I might send this to him to see if I did it right.