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The best web based WYSIWYG editors I've found are:
TinyMCE 3: Creates compliant XHTML code.
WIDGeditor: Small and designed to create clean code, but may have a problem with some versions of Firefox.
If you're just after simple stuff like retaining newlines and paragraphs, it's fairly easy to build a PHP script that'll convert them to <br /> and <p></p> tags.
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