I think this is the correct behavior.
When you delete a paragraph separator character the next line should come up and start where the deleted started. I think the problem (not directly solvable) is that you can’t select the leading tabs in TaskPaper 3, and so maybe your normal way to delete a line of text in a text editor is:
Move to the very beginning of the line.
Shift-Down Arrow to select the entire line and the newline character
That won’t work as you expect in TaskPaper because you can’t really do step 1, since you can’t select the leading tabs. Removing the ability to select leading tabs is a fundamental decision that I made and that isn’t really possible to change.
Instead I think you should use the Item > Delete Item (Command-K) command. It’s faster and will do what you want most of the time I think. It does have one problem, which is that it deletes the item branch (item and any children) which might not be what you want. I’ll try to add a related “Delete Line” command in an upcoming release that will do the same thing, but leave children in place.