The default pseudo-array delimiter is a comma -- , -- you're trying to use a newline but haven't told it so. Try:
Set Variable "Local__CurrentName" to Text "%Variable%Local__PresetList[Local__Iteration]\n%"
But this isn't a very efficient way of doing what you want, especially since you only use the iterator for array access. Take a look at the "For Each" Action, which you can use to work through your text block one line at a time: