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So before I start editing the theme so that the posts are wrapped in paragraph tags, does anyone know if this would be beneficial? I'm thinking it's not going to make it worse so it can't hurt to try but want to get opinions of anyone who might have gone down this road before.
It still makes good sense to put your text in semantically meaningful containers - paragraphs, heading tags, lists, blockquotes and so on. That way you are giving a clearer signal for the algorithms to tune in to.
After all, the M in HTML stands for mark-up. The original concept was that you BEGIN with some document, and then ADD mark-up. You are tagging the various parts of a document to tell user agents what kind of thing each bit is.
In my experience, documents that are well tagged from a semantic point of view tend to do better in search results.