When paragraphs in README.md are written as multiple lines (as happens when composing Markdown in Emacs and using M-q to insert linebreaks), content is truncated. See https://bitbucket.org/dstu/readme-truncation-demo (and the source of its README.md) for an example.
From the HTML generated on that project's overview page, it is apparent that, when a paragraph consists of multiple lines, content after the first linebreak is discarded. The expected behavior is that it will appear in the formatted output, with the extra linebreaks elided.
Dumping the text of that project's README.md into http://daringfireball.net/projects/markdown/dingus verifies this.