The blank lines to look out for are the ones outside of the PHP tags. So this:
Line 1: <?php
Line 2: some code
Line 3:
Line 4: ?>
is fine, but this:
Line 1: <?php
Line 2: some code
Line 3: ?>
Line 4:
will cause headers to be sent.
And you're right, the blank lines will appear in the HTML source, not on the browser screen.
HTH,
Beth