Index: wp-includes/formatting.php
===================================================================
--- wp-includes/formatting.php	(revision 9384)
+++ wp-includes/formatting.php	(working copy)
@@ -132,7 +132,7 @@
 	foreach ( $pees as $tinkle )
 		$pee .= '<p>' . trim($tinkle, "\n") . "</p>\n";
 	$pee = preg_replace('|<p>\s*?</p>|', '', $pee); // under certain strange conditions it could create a P of entirely whitespace
-	$pee = preg_replace('!<p>([^<]+)\s*?(</(?:div|address|form)[^>]*>)!', "<p>$1</p>$2", $pee);
+	$pee = preg_replace('#<p>\s*?(?!\s)([^<]+)\s*?(</(?:div|address|form)[^>]*>)#', "<p>$1</p>$2", $pee);
 	$pee = preg_replace( '|<p>|', "$1<p>", $pee );
 	$pee = preg_replace('!<p>\s*(</?' . $allblocks . '[^>]*>)\s*</p>!', "$1", $pee); // don't pee all over a tag
 	$pee = preg_replace("|<p>(<li.+?)</p>|", "$1", $pee); // problem with nested lists