I have a text file with the following format. The first line is the \"KEY\" and the second line is the \"VALUE\".
KEY 4048:1736 string 3 KEY 0:1772 string 1
Alternative to sed, awk, grep:
xargs -n2 -d'\n'
This is best when you want to join N lines and you only need space delimited output.
My original answer was xargs -n2 which separates on words rather than lines. -d can be used to split the input by any single character.
xargs -n2
-d