There are several ways round this problem.
1. Paste the text file into a doc and run stingo's word macro, which you can find here:
2. Try putting the text into BookCreator and tidying it there very quickly. It is here:
3. Run it through Gutenmark (google to find it).
3. Or do a search and replace as pdurrant describes. I do a similar process:
I paste the text file into a word doc, then click on "edit" and open "Find and Replace."
1. search for ^p^p. (Click on "more" and "special" to find the paragraph symbols.)Replace with ## or @@ or . (This is a placeholder for the paragraph breaks. You want to strip out the single linebreaks but leave the genuine paragraphs.)
2. Search for ^p. Replace with a line space.
3. Search for ##. Replace with paragraph mark.
This should sort the text out. Save as an rtf, or just leave as a doc. The reader will convert it automatically.