This is the most recent version of Wordpress, which at the time of this writing is 2.7.1.
First, if you are like me you're thinking, "Gee, now that I've imported all these crappily formatted posts, I need a way to delete them all and start over." Then you start to panic, because it doesn't look like Wordpress does that.
Yep. It's plugin-huntin' time. The plugin I used was Bulk Delete by Sudar. Yes, I could just go into my database and start nuking tables or write SQL queries to do this for me. You have fun with that if that's what you want to do.
Second, go into the /wp-admin/import/mt.php script and look for this:
// Processing multi-line field, check context. if( !empty($line) ) $line .= "\n";
Then, replace it with this:
// Processing multi-line field, check context. if( !empty($line) ) $line .= "\n\n";
Finally, go into the text file you exported from Movable Type, and do a search for this:
CONVERT BREAKS: __default__
And change it to this:
CONVERT BREAKS: 1
Though quite honestly, I think this last step is extraneous, because a search through the MT script doesn't reveal it's being checked at all.
It should work. If it doesn't, I weep for you. I really do.