HTML formatting tags in XSLT getting lost

I have a notification services application up and running that sends notifications using email, and I am trying to format the event data in the XSLT. When the event data is created, it's formatted for nvarchar(max), using char(13) to insert the carraige returns.

In the XSLT to generate the email, I use the following in an attempt to format the text.

In the notification match template
      <xsl:call-template name="line-breaks">
        <xsl:with-param name="text" select="EventData"/>
      </xsl:call-template>

Formatting template
  </xsl:template>
  <xsl:template name="line-breaks">
    <xsl:param name="text"/>
    <xsl:choose>
      <xsl:when test="contains($text,'&#13;')">
        <xsl:value-of select="substring-before($text,'&#13;')"/>
        <br/>
        <xsl:call-template name="line-breaks">
          <xsl:with-param name="text"  select="substring-after($text,'&#13;')"/>
        </xsl:call-template>
      </xsl:when>
      <xsl:otherwise>
        <xsl:value-of select="$text"/>
      </xsl:otherwise>
    </xsl:choose>
  </xsl:template>

I've used this template many times in the past, so I know it works. However, when I use it here, the formatting doesn't work, and the HTML is never inserted. I thought that the Char(13) was getting stripped by NS, but after replacing char(13) with a string 'linebreak', I'm still not getting the format. Is there some reason why call-template would not work in a notification services XSLT  Any other suggestions for formatting the HTML in the email

Thanks
Erick