I figured it out. You need to add this in total:
add_filter( ‘new_user_approve_approve_user_message_default’, ‘wpautop($br)’ );
add_filter( ‘new_user_approve_deny_user_message_default’, ‘wpautop($br)’ );
This fixes it for BOTH emails and it also preserves the breaks as it should. Now all I have to do is figure out how to get it to actually display the password reset link. Not even sure if I need it, the way I have it set up.