Can I use an action to add a line break after every double space (or some other character)?

It is possible to include newlines in text replacement on iOS, just not as straight forward as it should be, and not necessarily accessible to all.

Drafts does support TextExpander expansion on iOS, so that is another consideration.

In terms of actions, there is one that @dchar created that sets you up with a text replacement system, including “multi line phrases”, within Drafts and driven by a single action.

Hope that gives you some options.