Hmmm, interesting. Well, I have not tried this using line breaks, but I have with other symbols. What you need is the str_replace function. It will replace the specified symbol/space/whatever with whatever you choose.
On the porcess PHP page (the one where you INSERT the information), run the variable (which holds all the info that you entered) through this:
$replace = str_replace("/n", "</li><li>", "$string");
Where $string is the information. I am totally not sure if it will accept the /n as a line break :S If any errors popup, change that to || or some other obscure symbol, and use symbols to define the </li><li>
Oh yeah, and enter the $replace variable into the database, and not the old $string (or WHATEVER)