Index: wp-includes/formatting.php
===================================================================
--- wp-includes/formatting.php	(revision 4996)
+++ wp-includes/formatting.php	(working copy)
@@ -56,6 +56,7 @@
 	$pee = preg_replace('|<br />\s*<br />|', "\n\n", $pee);
 	// Space things out a little
 	$allblocks = '(?:table|thead|tfoot|caption|colgroup|tbody|tr|td|th|div|dl|dd|dt|ul|ol|li|pre|select|form|map|area|blockquote|address|math|style|script|object|input|param|p|h[1-6])';
+	$allblocksnop = '(?:table|thead|tfoot|caption|colgroup|tbody|tr|td|th|div|dl|dd|dt|ul|ol|li|pre|select|form|map|area|blockquote|address|math|style|script|object|input|param|h[1-6])';
 	$pee = preg_replace('!(<' . $allblocks . '[^>]*>)!', "\n$1", $pee);
 	$pee = preg_replace('!(</' . $allblocks . '>)!', "$1\n\n", $pee);
 	$pee = str_replace(array("\r\n", "\r"), "\n", $pee); // cross-platform newlines
@@ -68,8 +69,9 @@
 	$pee = preg_replace("|<p>(<li.+?)</p>|", "$1", $pee); // problem with nested lists
 	$pee = preg_replace('|<p><blockquote([^>]*)>|i', "<blockquote$1><p>", $pee);
 	$pee = str_replace('</blockquote></p>', '</p></blockquote>', $pee);
-	$pee = preg_replace('!<p>\s*(</?' . $allblocks . '[^>]*>)!', "$1", $pee);
-	$pee = preg_replace('!(</?' . $allblocks . '[^>]*>)\s*</p>!', "$1", $pee);
+	$pee = preg_replace('!<p>\s*(</?' . $allblocksnop . '[^>]*>)!', "$1", $pee);
+	$pee = preg_replace('!(</?' . $allblocksnop . '[^>]*>)\s*</p>!', "$1", $pee);
+	$pee = preg_replace('!(<p>\s*</p>(</?' . $allblocksnop . '[^>]*>))!', "$2", $pee);
 	if ($br) {
 		$pee = preg_replace('/<(script|style).*?<\/\\1>/se', 'str_replace("\n", "<WPPreserveNewline />", "\\0")', $pee);
 		$pee = preg_replace('|(?<!<br />)\s*\n|', "<br />\n", $pee); // optionally make line breaks
@@ -80,7 +82,6 @@
 	if (strpos($pee, '<pre') !== false)
 		$pee = preg_replace('!(<pre.*?>)(.*?)</pre>!ise', " stripslashes('$1') .  stripslashes(clean_pre('$2'))  . '</pre>' ", $pee);
 	$pee = preg_replace( "|\n</p>$|", '</p>', $pee );
-
 	return $pee;
 }