Issue with Field Options > LIST OPTIONS

Hello! 

I have an existing site that's been using subcategories to organize photos. The site has recently developed an issue with the subcategories after running fine for years.  

In the List Options field, it used to display "Large Mammals" and "Small Mammals" as check box options.  It recently changed to  "Large Mammals\nSmall Mammals" in the admin area rather than the two separate options. 

Here's what I tried: (screenshot attached)

• Deleting both subcategories and adding them back in.  Large Mammals|Small Mammals    RESULTS IN: loss of whatever the first subcategory is, in this case, "Large Mammals" and only provides Small Mammals as an option. 

• Entering on separate lines, which I've always had to do.

Large Mammals
Small Mammals

RESULTS IN: "Large Mammals\nSmall Mammals" as only checkbox option for subcategories

Any thoughts on how to fix this? 
running version 2.08. Just contacted the host. They are now running php 5.5+

Thanks! Tina