Hey @allan_leonard ,
Thanks for posting this question. I think the problem is that you have unchecked "Allow multiple paragraphs" in the Rich Text field configuration.
Then, I would guess that in the text editor, you're using a line feed (shift + enter) instead of a carriage return (enter) to create a line break. A line feed doesn't create a new paragraph; it creates a line break within the same paragraph, so the styles are applied to everything.
Regarding the error with embeds and images, I would guess that they only work with "Allow multiple paragraphs," but I'd have to check with our product team. I'll get back to you on that 
I hope this helps. Let me know if enabling "multiple paragraphs" changes things.
Sam