Here's a solution. Hopefully there's a more elegant one. In my data, "test" is the data tiddler and "idx1" is the index.
This uses the new search-replace operator to replace linefeeds with html linebreaks, so that the text will display
as expected.
<$vars eol="<br/>" lf="""
""">
<$set name=out value={{{ [[test]getindex[idx1]search-replace:g<lf>,<eol>] }}} >
<<out>>
</$set>
</$vars>
If you want output like TW, with single linefeeds ignored but double linefeeds recognized, then you could use the simpler:
<$wikify name=out text="""<$transclude tiddler=test index=idx1 mode=block />""" output="html">
<<out>>
</$wikify>