I prefer indent and no space, except for scene changes. There, I prefer 3 or 4 asterisks between paragraphs, similar to what you find in pbooks with scene changes that occur at the end of a page. That said, a blank line is still better than nothing.
I don't use Calibre because every time I've used it, it not only removes the unwanted space between every pair'o'graphs

, it also removes the scene changes, which is worse in my opinion. Now that I use CoolReader with its own CSS file on my PocketPro, I don't have to worry about that anymore.