I have the same problem. I got it to work somewhat by using 9" text and setting the spacing to 4" above and below the next paragraph. I also got it to work by using 4" text with the same settings above and then scaled the text up to 9". It automatically increased the 4" spacing to a larger value. It is a clumsy work around but it works.
I got this to work in a round about way with v2011. I used 1" text and since I wanted the space between paragraphs to be 1-1/2 the text size is set that to 1-1/2". The text size I want is 9" so I went to "Annotation" on the ribbon bar and selected scale text and scaled it to 9". Attached is the end result. This is a clumsy fix.