Here is the code to create your own plugin to edit the ‘theme_advanced_blockformats’ string. It works for me using 2.8.5
function customformatTinyMCE($init) {
// Add block format elements you want to show in dropdown
$init['theme_advanced_blockformats'] = 'p,h3,h4,h5,h6';
// Add elements not included in standard tinyMCE doropdown p,h1,h2,h3,h4,h5,h6
//$init['extended_valid_elements'] = 'code[*]';
return $init;
}
// Modify Tiny_MCE init
add_filter('tiny_mce_before_init', 'customformatTinyMCE' );