Line and Paragraph Spacing cannot be changed

Yes, to update a style you can:

  1. Apply the paragraph style you want to edit to some sample text in the editor.
  2. Adjust the spacing for the sample text via Format ▸ Paragraph ▸ Line and Paragraph Spacing...
  3. With the insertion point in that paragraph, select Format ▸ Style ▸ Redefine Style from Selection... to update the paragraph style.

You may also want to check this post and following for more discussion on paragraph spacing within a block quote.