Yep, by default, nagios 2.x has a message response size a lot smaller than NRPE. You can increase that size up to NRPE's and then recompile nagios, but no further in my experience.
If you tcpdump an NRPE conversation, they all have the exact same size. It has a defined message length, and if your plugin output doesn't fill that message length, it just fills the rest with null characters.
I'm guessing something in the NRPE code looks for a specific message length, throws it through its encryption functions, and then totally bails if it's the wrong length. But i'm not a programmer, maybe you can hack through it.
We ended up upgrading to Nagios 3.x for multi-line support, and all of our output fits through NRPE....not sure what else you can do!