You've got a few ways of addressing this issue. Your file read has the conver EOL option checked (right click on the icon) which will convert all end of lines to the system system stand, which in windows is a line feed. Your demo text file has these as carriage return/line feeds.
If you uncheck this option, then you will want to change your match pattern to match on a carriage return and line feed.
If you leave this option checked, then you need to change your match pattern to match on a line feed, not a carriage return.
What you are getting now is a no match (if you look at the index output of the match pattern, it will generate -1 indicating no match). The Match before is actually the whole sting (you test hides this fact by only showing one line, but the whole string is there. The match after is empty.
I did both of the above options and your Vi works as you want it.