Downloaded File - li error

I downloaded the files so that I could work off of DW instead of the workspace. However the li tags under the "items" ul are grouped together in one line. In an effort to make it more readable, I separated each li into their own line.

However for some reason this causes the Garth Brooks image to drop down a line. It'll only go back up once I put the li's all on the same line again. From my experience the format of your code shouldn't affect anything on the page like this, since HTML should ignore any blank spaces. Just wondering how to fix it or why it's happening, not a huge deal...but it's kind of bothering me that I can't figure out why. I didn't adjust anything in the html or css other than adding the two php elements that the video instructed after downloading the files (except obviously trying to reformat these li lines). This error occurs in both the html & php version of the file, however doesn't occur in the workspace. Just locally.