It seems a bit of a waste of space to have some tags like option (in select menus) waste 3 lines for each option item (since the opening tag, value, and closing tag are each put on own line).
Is there and way to specify which tags should do this and which don't?
Setting "indent":false in your User HtmlTidy.sublime-settings file will result in far less indentation and fewer lines.
No, that feature doesn't exist. This package is a wrapper for libTidy. Adding this feature would require additions to libTidy. You may want to take a look at the tidy-html5 library, which is a fork of libTidy.
I found a temporary solution/workaround, you can read about it here: http://stackoverflow.com/questions/13143850/sublime-text-2-format-html-tags-content-in-one-line/13145975#13145975
As I said in that post, it's not ideal by any means, but...
I didn't know about reindent. It should be possible to call it within the plugin, and remove the need for the workaround.
Cool. Is this something you would incorporate in the plugin? Or is this something that 'welovewordpress' would do?
Also, why does HTMLTidy remove everything from the HTML file leaving only the markup that's inside the < body > tag?