in reply to 'show as entered' option for poorly formatted posts.

How is this an improvement over the "preview" button? If it's just to see the raw HTML, then you already have a nice little text box to view it. People who don't use code tags will probably continue to not use code tags. In fact, wrapped in a <pre> makes it worse, since the code was likely formatted correctly before it went into HTML, and now it looks correct inside the <pre>.

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Note: All code is untested, unless otherwise stated