line breaks in WPv1.5

I just installed today’s build and noticed that none of the line breaks or paragraph tags are functioning. some posts come close to address the problem, but often lead to the challenge of removing line breaks.

i want them in and i can’t seem to figure out where in the coding the line breaks are going wrong. i know it’s a formating issue when it comes to posting. i’ve checked the functions-formatting file but can’t seem to isolate the problem.

any suggestions? thanks!