OK, we all hate the way that Safari 3.0.x strips out line / paragraph breaks when we use the Visual Editor. As we all know, this is a limitation of WordPress / TinyMCE / Safari, which is (hopefully) under development for a fix.
In the meantime, there is a way round it - for Mac users anyway - that means you don't have to change browsers just to post to WordPress. I've done some limited testing on this process and it seems to work, but I've not had a chance to use it extensively so don't know yet if it breaks anything else. As always, if you're going to try this, take precautions!
1. If it's open, close down Safari.
2. Open Terminal
3. At the prompt, type this: defaults write com.apple.Safari IncludeDebugMenu 1
4. Start Safari.
5. If you've done it right, you'll see that you have a new "Debug" menu item. Click this.
6. Select "user agent"
7. Select a browser that isn't Safari. I chose "Firefox 18.104.22.168"
I've only tested this fix on Safari 3.0.x - but then Safari 2 never had the same problem - but it has allowed me to write and edit posts using the Visual Editor and without losing line breaks.
If someone out there can hack the Windows version in a similar way, then this problem might finally be solved.