The ctr-z feature is related to an upstream firefox bug. Cut and paste is handled by the browser rather than by Atto. When this happens it deletes the whole content of the editor including the default paragraph block element. The thinner line spacing is inherited from the editor container which is a div element. The wider spacing appears when a p element is inserted. This happens when you select paragraph from the style menu, but there might be another way of doing it depending on the browser.
No, it is a WYSISYG HTML editor.
Which version are you using? Eric Merrill recently did a number of fixes MDL-48467, MDL-49693, MDL-49686, MDL-49671, MDL-49564, MDL-47002, MDL-49565, MDL-46746, MDL-47003 to do with how atto cleans up the HTML (mostly focussed on what happens when you paste content in). I don't know if that improve things.
Almost all of that went into 2.9.0, 2.8.6 and 2.7.8.
I think it may be MDL-46069 again which you closed because Firefox changed, but I have seen it happen again. It would be helpful to have browser version info.
I realized that the formating problem is not from MDL-46069, but does occur in Firefox, but not Chrome. Whenever the contents of the editor are deleted in Firefox, a newline is inserted by default instead of and paragraph. Chrome's inserts both. Typing before newline in FF, does not cause a paragraph to be inserted, but inserting text after the last newline does.
