I use it quite a bit. I find that if the LIT text is formated properly then you don't need to really worry about the text running together. I've attached a .LIT file for you to try and my subsequent HTML output. See what results you get.
Now when you have raw text that runs together sometimes there are strange characters (sometimes non-printable characters) that are embedded in the document. You can often search for these and replace them (using Find/Find Replace in Notepad or Word for example) with carriage returns. Some more help with this can be found here:
http://www.handebooks.com/howto/tips.html
Hope this helps a bit...