Glad you found that.
The "Description" (aka Excerpt) is a plain text field (textarea) on the Add Entry page, located below the main WYSIWYG editor.
Are you pasting in HTML into the "Description" field? It is designed to hold plain text -- not HTML. The typical usage for it is to enter 2 or 3 "unformatted" sentences into the box. That code is actually correct
for its intended usage. It replaces newlines in "plain text" with <br /> tags.
If you're trying to show an "HTML" excerpt on the homepage, you might want to consider using the [more] functionality -- instead of Description/Excerpt. In the main WYSIWYG editor, enter [more] where you want the post to cut off. [more]
will be replaced with a "more" link that the person can click on to view the full post. This functionality is possible via the "BreakPost" extension.