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What you seem to be referring to are the blank lines between the <p>...</p> tags. These have no effect on how your book is displayed. The space between tags does not matter except for how readable your code is.
In 0.7.1 you can use Preferences->Clean Source and uncheck the Open and Save boxes and Sigil will no longer Pretty Print your source code on Open or Save.
Why iBookstore is having problems with your file is another question/forum.
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