I leave one empty line in between. Indenting is something I do at every new paragraph and every new chapter, so yes. (I don't know if everybody does this, but I format the ms as the final one is supposed to be right away, with wide margins and double/1,5 space between lines.)
I've been known to leave a blank line in between, and I do indent the next paragraph. However, most often I'll leave a single * in between paragraphs, instead of the blank space. I do this for publishing purposes, as that's the way it's done with Standard Manuscript Format. However, if you're looking to publish your piece always make sure you know what the publisher is looking for, and format it that way. If the publisher doesn't specify, go with Standard Manuscript Format.
there should be no empty lines in a ms other than between chapters, where the next one begins 1/3 - 1/2 of the way down the next page... for paragraph line breaks, when time, scene, or character pov changes, a single # placed in the center of the line is the accepted standard... .5" is the mandated indent for mss and all paragraphs and separated dialog must be indented... that includes the first paragraph, though in the printed book, it may not be... for ms format rules 'n regs, here is the best guide you'll find: http://www.shunn.net/format/story.html
