Dear Karl and W3C-Team,
I'll try to answer your questions
1.) Use case?
2.) How to implement it?
3.) Authoring tool requirement?
4.) User Agent requirement?

1.) I think that it's not the idea of "generic abstract markup" to have elements for declarative paragraphs. Instead, as I wrote, paragraphs should be the way, how to display the smallest logical group of the document structure.
You don't specify the <li>-element as being "a line, preceded by a list bullet" (for example <l before="bullet">list item</l>), but you say "It's a list item. What ever it may look like when viewed with your UA or with a special CSS applied."; and so I think that explicit paragraphs are superfluos (and some sort of physical markup).

2.) There's unfortunatly no way in CSS2 to specify selectors like ps[not(.//ps)], but as many modern browsers (IE, Netscape, Mozilla for instance) know XPath 1.0, it shouldn't be a problem to apply paragraph rendering to ps[not(.//ps)] (equivalent to p), and other style (or no style for normal screen display) to ps[.//ps] (which means the same as section).

3.) Authoring tools should provide the user some ways to specify the structuring of the document he's working on, or should try to guess it from the headings or forced line-breaks. This is the same problem if you have section and p elements.

4.) As mentioned above, there should be some sort of default rendering for ps[.//ps] and ps[not(.//ps)], which UAs are encouraged to use. But they, mainly UAs which don't display the webpage on screen, like aural ones, may also use this information about the textual structure in any other ways.

I hope, this is what you wanted to read (hear),
Daniel Kraft