OK, so it's 1am and I think I've nailed this bug. Lets see if it worked. :)
Laurel your whole blog is inside a single DIV. The original LB algorithm considered blocks of text to be anything inside a div. I'm not looking at DIV's, P elements and H1,2,3 tags. I didn't do this originally because of performance but I found a faster way to do a few other things so I can do these other elems now. The nice side effect is that users can edit their blog entries without losing their comments, as long as any paragraphs that received comments remain unchanged.
...It works most of the time...
