Because you are writing the string and overwriting it.
Try this:
string[] filePaths = Directory.GetFiles(@"c:\textfiles\", "*.txt");
foreach (string file in filePaths)
{
string[] lines = File.ReadAllLines(file);
List<string> list_of_string = new List<string>();
foreach (string line in lines)
{
list_of_string.Add( line.Replace("\n", "\r\n"));
}
File.WriteAllLines(file, list_of_string);
}