There is a known bug that recently cropped up in Adobe's Flash Player 10 plugin for Mac browsers, where it loses any manual linebreaks from pasted-in text:
There is nothing we can do to fix or workaround the problem in the way it affects our Seller Admin. As soon as Adobe fixes this bug, linebreaks in text will suddenly start working fine again for Mac users who upgrade their Flash plugin to use the bugfixed version.
Meanwhile, you may need to borrow a PC to paste-in any text from another file, or just type in your text manually.
BTW, note that while the textarea will soft-wrap long lines, only manual hard-returns count as the end of a line/end of a particular Variant definition.
Also, the SKU you specify at the start of each line is completely arbitrary and up to you; anything up to the first comma on each line gets treated as the SKU we pass back for your own internal reference identifying exactly which Variant permutation was ordered (most sellers just use their own stock-numbering system, or initialized abbreviations such as "RMP-tee" for a Red, Medium, Pocket tee-shirt).