Annoyingly I actually think '\r\n' is the correct line ending here - advance the paper and return the carriage, but I suppose unix took the simpler implementation which makes looping over characters, words (split by ' ') and lines (split by '\n') simpler as each loop only has a single comparison
Yep, on Unixen the translation of CRLF to LF when printing to the terminal (and from CR to CRLF when reading input from the terminal) is done in the kernel, it's called "line discipline".