Selecting "Convert rich text to MultiMarkdown" causes output to be double-spaced

And checking “Convert to plain text: Paragraph spacing” doesn’t help

I’m not sure what you are reporting here, as you’ve framed the expected and desirable result as though it were a problem. 99% of rich text content will be single-spaced in accordance with typical word processing usage—which in Markdown would result in one massive single-paragraph wall of text. So yes, the engine converts such spacing to a format that Markdown will expect, keeping paragraphs paragraphs in the output.

A better question might be: what are you trying to do here, that this conversion is messing up? Are you mixing your own Markdown into the source document? If so, you should be using a style for this, and set the style to Treat as raw markup in the Styles compile format pane. This will pass-thru all punctuation verbatim, switch off all RTF conversion and leave your lines alone as well.

I don’t use any markdown in my document. I’m just trying to get my markdown output to be like it was, which is like this (each paragraph ending with a single newline, rather than two).

1 Paragraph 1
2 Paragraph 2
3 Paragraph 3

Instead of
1 Paragraph 1
2
3 Paragraph 2

I can uncheck “Convert rich text to Markdown” which causes the spacing to go away, but it also stops italics from being indicated with asterisks.

I use version control (git) to track changes in my novels, and mmd is the only output I’ve found that that includes formatting and is reasonably easy to diff (spot differences in). This is something I use day-to-day, but more importantly I use it extensively when I get novels back from editors, as I find it is significantly faster than using Word’s track changes (per novel avg of 3:47 with mmd, 8:54 with Track Changes over the course of several novels of ~80k words).

There hasn’t been anything that works the way you describe throughout the beta I think—though perhaps at some point the conversion feature was not working properly. The MMD output and conversion systems have been under heavy construction until fairly recently. I’m pretty sure the main problem with them however was that paragraph double-spacing was happening too often, rather than not at all—as in it was even spacing out native Markdown text with the conversion option disabled.

I’m perhaps still not following why you would want a technically invalid (or at the least very poorly formed) Markdown document, even if you’re using it for diff instead of Markdown. Seems it would be a good idea to have a useful file just in case, as a backup, and that acclimating to the look of a proper Markdown file would be ideal.