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Under 6.26, the content of the eg loses its newlines before it is passed to the pre.
This was (and still is) not the case with transforms level 11409 in SVN.
Attached, test TEI source with the two outputs.
hmm. a side effect of the implementation of the whitespace handling rules
adding xml:space="preserve" will fix the <eg>
you don't want to hear this, I suspect. I am sort of reluctant to special case <eg>. I will
Wow! Glad to see that my very old neurons still learn so much new stuff every day.
Adding xml:space="preserve" to eg indeed solves the problem under 6.26. I feel that, semantically, eg should be xml-space-preserve by default, but if this is difficult, I don’t mind adding the attribute in my code. I do not have so much old eg and it is easy to search for and correct.
the opinion of others on the TEI council suggests I have no reason to give <eg> special treatment, so I'll leave as is for the moment.