Ok, nice that you guys are improving this feature!
And it seems you're almost there, but not yet ...
in FF 3.6 and Chrome (4.0.249.89) it does a pretty good job at converting it but instead of adding it as HTML it does a htmlentities on it, this being the result when I try it in your demo:
<div><!--[if gte mso 9]><![endif]-->
<![endif]-->
<p class="MsoNormal">Test line 1</p>
<p class="MsoNormal">Test line 2</p>
<p class="MsoNormal">Test line 3</p>
<p class="MsoNormal"><o:p> </o:p></p>
</div>