Indented paragraphs are not traditional nor standard on web pages. However, if you wish to indent, use the indent button on the second row of the toolbar (click Kitchen Sink to reveal it). Spaces will not work for indents. The browser will not recognize them evenly or consistently.
The space between paragraphs is set by the design of the WordPress Theme. Another standard (called whitespace), much research has been done to prove that this is preferred for ideal reading conditions. The option you mentioned is the only way to force what is called a line break, used mostly for addresses and poetry.
Since you asked, what you are missing is the difference between writing for the web and traditional writing. There are many differences, all based upon improving the reading experience for someone on a desktop computer, laptop, mobile phone, tablet, etc. Indents and no spaces between paragraphs went away in order to improve readability.
I've worked with many people coming from decades writing in traditional form and once they got the grip of this, they came to love it.
An alternative is to write in the TEXT editor, not the visual editor. At the upper right corner of the post writing box you will see the two listed. Click text editor to access that. It won't help with your indents (something really not appreciated on the web), but it will help with the spacing between the paragraphs. Just put one enter between paragraphs rather than two.
Good luck with this.