I usually see that behavior when opening text files generated on Unix. Unix uses just a LineFeed ('0A'x) as the end of line indicator, while DOS (Windows) uses a CarriageReturn ('0D'x) and LineFeed at the end of each line. WordPad is smart enough to intrepret the lines that end only in a LF but Notepad is not.
You can force SAS to write the CR into the end of the lines by adding the TERMSTR=CRLF option to your FILE statement.
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