I’m fairly new to wordpress and experiencing the same difficulties with my editor automatically removing line breaks or paragraphs. I changed the Tiny MCE settings as suggested above but the changes had no effect on the editor. Like others everything looks good until I save the updates. Working in HTML doesn’t improve things.
I am using a Mac, Firefox, and WP 2.0.5. Could this be a result of using a custom theme? Where might I look on within the theme’s files to make the changes that would allow manual entry of additional line breaks?
FYI I have never knowingly used Markdown and I don’t have a Markdown plugin.
Any help appreciated.