tinymce: no <p> or even <br/> tags added at all

How to make TinyMCE 3.4.6 in Drupal 7.8 behave like this: pressing Enter once should create a paragraph < p > tag and pressing Shift+Enter should create a new line < br/ > tag. How to achieve this ?

My Text Format settings for Full HTML have all filters turned off.
My Wysiwyg TinyMCE profile for Full HTML has all Cleanup and Output options turned off.

Here is what happens:

I am entering text in Full HTML, Visual mode:

Line1[crlf]

Line2

where [crlf] stands for pressing Enter 1 time. The text is displayed as expected, i.e. there are 3 lines: Line 1, then an empty line and then Line 2.

But after clicking on HTML button ("Edit HTML Source") I see no tags at all.. In HTML view there are only 2 lines, no empty line in between, so this is how it looks like in "Edit HTML Source" window:

Line1
Line2

I would expect to see this:

<p>Line1</p><p>Line2</p>
or

<p>Line1</p>
<p>Line2</p>

But there are no tags in HTML view. Then after saving, the node looks like this:

Line1 Line2
Notice the space between the words. It's not a space, it's a [crlf], or rather \r\n (I made sql dump to check).

So there is no way to visually make a new line or new paragraph. Adding mode [crlf] Enter characters makes no difference, they are all stripped.

What is causing such behaviour and how to fix it?