Adding these lines to functions.php file in the theme directory seems to be working for me (but I have not tested it thoroughly):
function cbnet_tinymce_config( $init ) {
$init['remove_linebreaks'] = false;
$init['convert_newlines_to_brs'] = true;
$init['remove_redundant_brs'] = false;
return $init;
}
add_filter('tiny_mce_before_init', 'cbnet_tinymce_config');