ESXi 8.x
This is by design. The /etc/ folder is extracted from a secure environment and cannot be updated directly.
You can set the MOTD in ESXi advanced settings:
See the Tech Docs for Vmware vSphere 8.0 ESXi Advanced System Settings.
To insert new lines or returns into the issues and motd configurations, you can use both the vSphere API and CLI. Newlines cannot be added in the UI.
For example, see William Lam's articles: