Take a look at the cropped screen shot below. This is an old post I made where two blank lines appeared between paragraphs after publishing even though I typed only one blank line when I made the post. You can get HTML view by clicking on the button "HTML" (upper left of the window, next to the button "Compose").
This is how it looked after publishing:
In the first picture, notice after the words, "about writing," there's a series of HTML code that separates each paragraph. Take note especially of the code "<br />." That's a break tag. It inserts a line break or starts another line. Everytime you press "Enter" the editor will insert a break tag.
Now, scan the rest of the code and you'll notice two more break tags before the start of the next paragraph, "This type of blog... ." So, having three break tags is like pressing "Enter" three times which means you'll have a double space between paragraphs instead of just one. Now, don't ask me why the editor inserted an extra break tag. I don't know why.
Below is another post I made:
Each paragraph has one break tag and another break tag to insert a blank line between the paragraphs. When I published this post, there was only one line between each paragraph which is what I wanted.
Notice also that the other post is practically empty of HTML code except for the break tag. I don't know how I did that but it didn't seem to affect anything. I guess if you don't change things like font, font size, color, or other such things, your post will be that much simpler.
Seeing how the absence of HTML code doesn't really affect things, I'm going to go back over my old posts and do some editing. I get a little irritated looking at all those spaces.
(late addition 21 October 2012)
I think I've figured out why the recent posts are almost empty of HTML code. In the past, I wrote my entries in MS Word and copy-pasted the text into Blogger. It seems that Blogger's editor is inserting the formatting into the text. I've been typing directly into Blogger lately and that's when the double spaced paragraph spacing disappeared. Note: I inserted a double space to separate this additional entry into this post. It's not the bug.
Also, if you look at my old posts, you'll see that the double spacing has disappeared. I went through every post and deleted the HTML code using the HTML editor. Other than the double space, nothing was affected. I only noticed later that there's a "Remove formatting" button at the top. I haven't tried it.
If anyone is having problems with double spacing of paragraphs, I hope this solution will work for you as well.