No... that just controls how FCKeditor responds when you hit your "return" or "enter" key... you can make it so when you hit "enter", it just creates a break tag and goes one line down as opposed to enter creating a new paragraph which then the spacing will be based on your p tag's stylesheet attributes.
I would just leave "enter" set to paragraph and then if you just want to create a break tag and go one line down... then use "shift + enter" which will give you a break tag.