Splunk has the concept of a line and event breaker. The line breaker will separate the lines within a source, whereas the event breaker will dictate when an event is multi-line or not. For your scenario, it sounds as thought you need to tune the event breaker to properly separate the events. In some situations, Splunk will try to combine events if it does not see a timestamp on each line. Again, this depends on how you have set the event breaker. For your scenario, you have said that Splunk shows these events have hundreds of lines implying that the line breaker is working correctly. To turn off line merging, you can set the SHOULD_LINEMERGE to False under your specific sourcetype within your $SPLUNK_HOME/etc/apps/search/local/props.conf file:
[your_sourcetype]
SHOULD_LINEMERGE = False
For more detail on settings, specifically for what dictates multi-line events:
http://www.splunk.com/base/Documentation/latest/Admin/Indexmulti-lineevents
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