When you create a post, in the admin panel, there is a set of checkboxes on the right side under "Renderers"... I believe 'Auto P' is the one you're looking for...

jj.

I'm pretty sure that's not it. It is an option but if you notice from my example, it's the exact same post with a different skin but the paragraph formatting is noticeably absent.

Figured it out guys. It was something in _main.php that I forgot to change when I upgraded to the new version. Thanks for everyone's help.