Crimson Editor's base handling of regular expressions prevents use of multiline regular expressions, including \n searches.
It has been noticed that it is the code handling this and has proposed a change in the regexp library used to avoid such things.
This partly works, CE uses RegEx So for beginning of line use ^ and end of line $
I dont think it replaces the \r\n though as running the replace $ with Y adds a Y to the end of each line.
IMO the desired result would be that the multi-lines are cat'd to the end of the first line with is terminated with an EOF instead of a \r\n.