Using l2h98.2b6, this file illustrates the problem
\documentclass{article}
\usepackage{alltt,html}
\newenvironment{myalltt}{\begin{alltt}}{\end{alltt}}
\newcommand{\foo}{\ \htmladdimg{../return.gif}\ }
\begin{document}
\begin{myalltt}
one line \foo
another line \foo
and a third \foo
\end{myalltt}
\end{document}
All the <BR>s disappear at the end of each line using myalltt. Using
a naked alltt they appear.
Graham
