Getting “Error Reading File” when trying to open a page in SharePoint Designer? Well, it’s a bug! SharePoint designer inserts Blank lines in the aspx file when you edit!!
Open the page as text in SPD (or any other Text editor), Remove Blank Lines (Careful! Don’t delete the code. Delete only blank lines). You can select few blank rows, and use Find & Replace!
Here is the screenshot:
Find the blank lines SharePoint designer adds, Remove Empty rows from the file.
There is a utility in codeplex: http://sharepointfilerepair.codeplex.com/