There are actually two separate problems here.
The first problem is that you must never, ever, use BD to directly load a text file, or it completely messes up paragraph breaks. Convert to some other format first, and then load that.
The second, unrelated, problem, is that, by default, BD treats any "." as the end of a sentence and will probably break the paragraph at that point. That's the reason for the paragraph breaks after abbreviations like "Mr.", "Dr.", etc. The "Book Cleaner" files that Jon and I wrote will solve that problem, and can be download from here
Personally I think that this kind of thing matters a great deal, but obviously I respect the fact that it may matter less to other people