MicroStation V8 - Automatic line spacing is available in the DGN workmode only.   The distance to the next line is calculated as: Top of line + Line Spacing + Baseline.   The baseline is determined by the arrangement origin of the text (upper left) + the height of the tallest character.  

Note:

The number used in the  Line Spacing field is a factor of the text height and not a value.

 In a metric file, the numerical value of the Line Spacing in the Element Information dialog will display the same value as the Line Spacing in the Tool Settings dialog.

In an imperial file, the value in the Line Spacing in the Element Information dialog will be displayed in meters.    For example, the text height is set to 10 feet, the line spacing is set to 0.5 of the text height which is 5 feet.  In the Element Information dialog, this is converted to  5  /  3.048  =  1.6404 meters.