Ok, the indentation issues in WordPress 2.8 were caused by another plugin, SyntaxHighlighter Evolved. I upgraded to SyntaxHighlighter Evolved from Syntaxhighlighter Plus as Evolved claimed to have support for WordPress 2.8 whereas Plus is apparently not being updated anymore.
The next question I have is, now that WordPress has syntax highlighting in the backend with the code editor, can we use this function in our posts to have the native code highlighter work rather then needing a plugin?
My first complaint (quite possibly a fault) about WordPress 2.8 is that when using <pre> tags in a post if you switch between the Visual tab and the HTML tab all indent/space formatting is lost.
This is something that worked fine on WordPress 2.7.1 but fails on 2.8, as you can imagine this is a real pain if you are trying to post snippets of code or anything else that requires spaces/tabs for formatting. I am hoping there is a quick fix for this.
If anyone has any suggestions please let me know.