Give this one more shot...
Here is some very simple HTML, no css:
Spoiler:
Code:
<html>
<body>
<h3>heading</h3>
<p>Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum</p>
<p>Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum</p>
<blockquote>
<p>Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.<br />
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.</p>
<p>Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.</p>
<p>Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.</p>
</blockquote>
</body>
</html>
Add that to Calibre in a new book record.
Then convert, go to the 'Look and Feel' section, and paste the following lines in extra CSS:
Code:
p {margin-top: 0em; margin-bottom: 0.0em; text-indent:1.5em}
h3 + p {text-indent:0}
blockquote > p {text-indent:0;}
Make sure 'remove spacing between paragraphs' is NOT checked.
click OK to convert.
If you're converting to mobi (your first screenshot is of a mobi file and not html) then I suggest you not use the Calibre viewer to decide if your ebook is 'good' as Calibre will convert from mobi to ePub to load it in the Calibre viewer. Use the Kindle previewer for accurate rendering of mobi files.
That output looks like this on my machine:
Converted mobi file attached.