BTW, when I save the NormalEmail.dotm, I can get most of the settings to save, but not the "Don't add space between paragraphs of the same style". I checked that box then saved the .dotm file, but when I created an email and looked at the settings, the box was still unchecked.
I accidentally stumbled upon one way to fix my problem though. In the Mail Format options of Outlook, if I uncheck the box "Reduce the file size of the message by removing formatting information that is not necessary to display the e-mail message" the issue of extra spacing no longer occurs. If anyone else runs into this same problem you can try that.
If not, a surefire way to correct the additional spacing caused by the interpretation/settings of paragraph tags is to use a program and script to "automatically remap the Enter key to Shift+Enter whenever you are composing HTML emails in Outlook" such as described here: http://www.fix-outlook-line-breaks.com/