This is done by design. Our recommendation is to not use non-printable characters (those less than 0x20), except the TAB character.
It is due to email clients, which have problems to display those characters.
Actually, it is possible to encode those characters, but it is strongly discouraged:
mail.Headers.Add("Subject", "=?us-ascii?Q?FirstName =0A LastName?=");
For example Outlook displays only "FirstName ".