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There's absolutely nothing inherent in the MobiPocket format which requires blank lines between paragraphs - if a book has them, the creator has put them there.
Take a look at some of the MobiPocket books in the Baen "Free Library" using the free MobiPocket Desktop Reader. You'll find that some books separate paragraphs with blank lines; others indent paragraphs and don't have blank lines. It's entirely down to the way they were created.
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