You are right about the <br> tag and, I believe, they will be fixed for the next major release which will validate as XHTML.

EDIT.

Didn't need to look after all, just think. This is not particularly elegant as a solution but it does work.
Go to line 312 in parser.php and change it to this

$replace = array('<span style="letter-spacing:normal"><br></span>', '    ', '  ', '  ');

All this bit of code actually does is turn letter spacing off before the <br> tags are rendered and then it is turned back on again for the next line of text. You can also solve the problem using a non-breaking space but this will result in indented text.

You may have to make other adjustments in parser.php, infact wherever you see two <br> tags used. The method is the same in all cases though, just wrap them in a span which sets letter-spacing:normal.

(I need to space out the individual characters slightly, otherwise with PunBB's default style settings, Chinese content are a pain to read.)

Any pointers would be appreciated.

PS: I thought the tags must be <br /> to be validated? The source that 1.1.3 produces use only <br>.