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All the options under look and feel only manipulate css, they don't actually change html.
If the section break is actually a blank paragraph then the 'remove spacing between paragraphs' option will not delete the blank paragraph. All that option does is manipulate the CSS, it doesn't actually delete blank lines. On the other hand if it's just a div then you could lose the softbreak, but there will still be a div there, so you could easily find it in Sigil and fix its css.
Now if you're also enabling preprocessing under structure detection then the behavior is different. Preprocessing does change the html. One thing it looks for is if there is an empty paragraph between every full paragraph. If there is, and the user has enabled 'remove paragraph spacing' under look and feel, then it will delete all the blank lines - otherwise the remove paragraph spacing option wouldn't actually work. I haven't looked into solving the softbreak problem here - though now that I think about it it's probably doable. However without knowing what options you've enabled and the way softbreaks are implemented in your doc I don't know whether any of that applies.
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