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If I swap out the haltdef/halt with setting the line to a blank line, weirdness still happens

If you add /echos for debugging and also use /debug to output to debug.log, do you see anything interesting?

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Q: Since, by design, the /parseline command does not break apart inputs by new lines($crlf) what is the point of the -n switch or supporting bvars?

The -n switch is required because every line that goes to or comes from a server must end in a CR/LF. The use and utility of &binvars is up to the scripter.