You may have noticed that after neatly setting out your post within the TinyMCE editor, when the page is published, the paragraphs are all squashed up.
The issue is a CSS issue. Basically the style applied to the P tag by TinyMCE and D7 are different - so it displays OK in the editor, but when the D7 code renders it - it is displayed differently.
The offending code is in templates/base/css/general.css, the attribute margin:0px is applied to the P tag, remove this and the issue will be gone, BUT there is one caveat - obviously this affects ALL instances of the P tag - so it may be that whilst this cures the immediate issue, it may cause problems elsewhere (i've not tested this, and this may be different for your site - depending on which template you use and what modifications you have applied to them)
To fix the issue, you will need to change general.css in two places -
a img, form
and on line 120
There is no real need to apply the attributes to the P as has been done in the original code, plus declaring the base P tag in two different places can lead to inheritance issues.
If it turns out that removing these elements has too much of a knock on effect on other areas of the site, then The best solution may be to alter the TinyMCE css to match the D7 general by adding the margin:0px to plugins/tiny_mce/themes/advanced/skins/default/content.css At least then what you see will actually be what you get