I'd likely try something entirely different:

#!/usr/bin/perl

use strict;
use warnings;

my @file;
while(<DATA>)
{
    # if we end in a backslash, add the next line...
    # (more error checking probably is required if we're at eof,
    #  but I'll leave that as an excersise for the reader ;-)
    while (s/\\\s*\Z//)
    {
        $_ .= <DATA>
    }
    push @file, $_;
}

print @file;

__DATA__
YACCCOMPILE = $(YACC) $(YFLAGS) $(AM_YFLAGS)    
LTYACCCOMPILE = $(LIBTOOL) $(AM_LIBTOOLFLAGS) $(LIBTOOLFLAGS)         
+  \
        --mode=compile $(YACC) $(YFLAGS) $(AM_YFLAGS)
YLWRAP = $(top_srcdir)/ylwrap

SOURCES = $(libpiuserland_la_SOURCES) $(pilot_addresses_SOURCES)      
+  \
        $(pilot_clip_SOURCES) $(pilot_csd_SOURCES)                    
+  \
        $(pilot_debugsh_SOURCES) $(pilot_dedupe_SOURCES)              
+  \
        $(pilot_dlpsh_SOURCES) $(pilot_file_SOURCES)                  
+  \
        $(pilot_foto_SOURCES) $(pilot_foto_treo600_SOURCES)           
+  \
        $(pilot_foto_treo650_SOURCES) $(pilot_getram_SOURCES)         
+  \
        $(pilot_getrom_SOURCES) $(pilot_getromtoken_SOURCES)          
+  \
        $(pilot_hinotes_SOURCES) $(pilot_install_datebook_SOURCES)    
+  \
        $(pilot_install_expenses_SOURCES)                             
+  \
        $(pilot_install_hinote_SOURCES) $(pilot_install_memo_SOURCES) 
+  \
        $(pilot_install_netsync_SOURCES) $(pilot_install_todo_SOURCES)
+  \
        $(pilot_install_todos_SOURCES) $(pilot_install_user_SOURCES)  
+  \
        $(pilot_memos_SOURCES) $(pilot_nredir_SOURCES)                
+  \
        $(pilot_read_expenses_SOURCES) $(pilot_read_ical_SOURCES)     
+  \
        $(pilot_read_notepad_SOURCES) $(pilot_read_palmpix_SOURCES)   
+  \
        $(pilot_read_screenshot_SOURCES) $(pilot_read_todos_SOURCES)  
+  \
        $(pilot_read_veo_SOURCES) $(pilot_reminders_SOURCES)          
+  \
        $(pilot_schlep_SOURCES) $(pilot_wav_SOURCES)                  
+  \
        $(pilot_xfer_SOURCES)

RECURSIVE_TARGETS = all-recursive check-recursive dvi-recursive       
+  \
        html-recursive info-recursive install-data-recursive          
+  \
        install-dvi-recursive install-exec-recursive                  
+  \
        install-html-recursive install-info-recursive                 
+  \
        install-pdf-recursive install-ps-recursive install-recursive  
+  \
        installcheck-recursive installdirs-recursive pdf-recursive    
+  \
        ps-recursive uninstall-recursive
[download]