I decided to turn off the visual editor in WordPress today. It has an annoying habit of removing the <p> and <br /> tags when you switch to the code tab. This would not be a problem if it did not remove the blank lines inside a <blockquote> tag, too. This problem occurs when you start out on the visual tab, go to the code tab, return to the visual tab and then go back to the code tab. The second time you go to the code tab the blank line disappears. The end result is a paragraph with all of the sentences bunched together in one paragraph. Yea, it looks pretty ugly. I cannot see how this could be per design, so I submitted this as a bug.
I found that if you use the manual editor, the <p> and <br /> tags and the line spacing get stored with the post correctly. This change should work out for me since I write most of my posts using LiveWriter and I use the manual editor primarily to tweak the html.
The problem that started me on this merry chase was a subtle line spacing issue with paragraphs inside a blockquote. I did not know that my CSS for paragraphs inside a blockquote used margin: 0px; and this margin value removed the blank line that normally follows a paragraph. Changing this code to margin: 0 0 15px; restored the normal paragraph spacing. Of course, the source of this problem is obscured if the visual editor keeps stripping out the <p> tag.