you closed the double quotes in betweencityOptions.html had newlines \n. replacing it helps.
<html>
<head>
<script type="text/javascript" src="http://code.jquery.com/jquery-1.4.1.js"></script>
<script type="text/javascript">
$(document).ready(function() {
var theCitiesList="<theCitiesList='<?php echo htmlentitiesstr_replace(array("\r\n", "\n", "\r"), "",file_get_contents('cityOptions"cityOptions.html'html")); ?>";>';
$("select#chooseCity").html(theCitiesList);
});
</script>
</head>
<body>
<form id="searchForm">
<h2>Selecione uma cidade: </h2>
<select id="chooseCity">
</select>
</form>
</body>