What format/s are you working with? For ePub I don't rely on any blank lines for spacing between elements, so the Look & Feel option to "remove spacing between paragraphs" is a good starting point. You can then introduce spacing for other elements, (headings etc.) by adding styles with margin-top/margin-bottom values (in Extra CSS), that only affect your tags for headings etc.
Alternatively you could Tweak an ePub, (it's on the right-click menu), and manually edit the stylesheet. Either way, CSS is definitley the easiest way to apply formatting to a book.
Margin-top/bottom are best in units of em, (so that they are affected by the zoom level), whereas left/right are best in pt, (so they don't increase with zoom level and consume lots of screen width.)
It's hard to be more specific without an example of your input and output.
What are you currently doing to re-add spacing?
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