@ILB - That story works fine for me. What's your OS? There have been some possible issues reported with some stories when using Linux.
@Lethe - Ditto: Your OS?
If either of you could gather the debug output (run calibre as 'calibre-debug -g' from command line and save the output) and post it for me, that would help a lot, too.
The plugin doesn't add indents. Some ebook readers (notably nook in my experience) default to using indents with <p> paragraphs. (But not when the source uses <br> tags.)