That first regular expression is translating hex encoded characters back into regular characters. For example, if it sees %20, it will translate that into a space.

W/r/t the second question--yes, that looks like it's causing the spaces instead of carriage returns. \x20 is a space character (\x20 = hex 20, so space in ASCII).

You could change that to:

    $sub_body =~ s/\n/<br>/g;
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Try that and see if it works for you.