Just use paragraphs inside the blockquote:
Code:
<p>Blah, blah, blah wrote:</p>
<blockquote>
<p>Dear Sir,</p>
<p>Blah, blah, blah.</p>
<p>Sincerely,</p>
<div class="signature">Myself</div>
</blockquote>
<p class="noindent">and went to bed.</p>
(I would have liked to include the <blockquote> inside the first <p>, and avoid the "noindent" class, but alas, <p> elements cannot contain other block elements
)