Well, I've been playing with the editor some more and I think I have it figured out...kind of.
First off, you MUST use the full size editor if you are going to make ANY changes. Doing so in the little window in the listing input screen will just mess things up. So before you do anything switch to the fullscreen editor.
Next, one of the problems I was having was the blank lines between paragraphs would disappear when I previewed. I could put a hundred carriage returns in and the thing would move the paragraphs back together. The fix? A single space in the blank line. That's it. Hit the spacebar once and the blank line stays. This is also true for the justification problem I was having. Whatever I set it at in the full size editor is what it shows in the previews. This is totally different than what happens if you use the small editor.
I've actually set up about a dozen listings in the past few days by going in and creating similar listings from saved ones. I've done all of the editing in the FULL SIZE editor and it has works without a hitch.
It seems clear to me that the key here is the full size editor. For whatever reason, that one and the small window editor in the entry page are not one in the same. This may be something Auctiva wants to investigate too.
Like I said, all i was entering was text with a few different fonts and colors. No photos or graphics. But now it looks like I can live with it and bypass the whole cut and past routine at last!