TinyMCE produce P elements

This is way If you want to change new line in TinyMCE with <br/> character :

tinyMCE.init({
   forced_root_block : false,
   force_br_newlines : true,
   force_p_newlines : false
});

For the display you can use a simple CSS trick like this on file tiny_mce/themes/advanced/skin/default/content.css :

p {margin:0; padding: 0;}.

See also: Reasons why not to use BR elements for linebreaks

regards..