Thanks for spotting the extra library.php! I'll delete and re-release...
Where did you see the broken links? I'm not seeing that on my site. Is this a vanilla install, or an established site? I'm wondering if some variable path was changed...
Is it an existing edit box with gui enabled? If so, you might try inspecting code.embed.gui and make sure it uses paths like this:
<a href="javascript:insMarkup('**','**','Bold','{+guiid}')"><img src='{+system}/files/gui/bold.gif' title='Bold' style='border:0px;' /></a>
Or you could just delete your local version of that page and use the core one--unless you have customized it.
As for the <br> issue, the new system will definitely change some page displays. In the above example, it seems the new output is now actually more intuitive. That is, when there is a linebreak in the page content, there is a linebreak in the output. And when there is not, there isn't. I think that is what I was aiming for.
Actually, that's why I went this direction--because in pretty much every place I found a need to fix up my vertical spacing, the output didn't match the input. Usually, there ended up being some workaround I just had to undo to get my display to correct itself. Going forward, it seems like it is going to be much more rock solid intuitive. What you put in is what you get out.
One option I could add is using the ` escape character at the end of a line to escape the <br>. I've also thought about (but haven't done yet) using a leading '.' to indicate that line should be wrapped in a <p> tag. But I have not yet really seen a need personally for either of these...
Anyway, let me know where you saw the bug and maybe the underlying page content, and I'll see if I can track it down and re-release this.
Cheers,
Dan