How about this:

#!/usr/bin/perl -w
use strict;
my ($line, $spacer);
while(defined($_=<>)) {
  s/\n//g;
  if ($_ =~ /^[0-9]{3,5}/) {
     print "$line\n" if defined($line);
     $line=$_;
  } else {
     $spacer = (/^\|/ || $line =~ /\|$/) ? "" : " ";
     $line.="$spacer$_";
  }
}
print "$line\n";  #get last one...
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If a line starts or ends with a pipe ("|"), then it assumes you do not want extra whitespace around it. Otherwise, it should honor any leading and trailing whitespace on each line (so if one line ends with a tab, and the next starts with one, the code will spit out two tabs in a row).