I am using Firefox3 on Ubuntu (And I found a bug in SO while at that :-D) The expected behavior is not to see any margin between the DIVs, while a margin is shown, originati
I've just checked that with FF on Windows and the p elements are contained as they should be and not outside the div. It looks ok on IE7 as well.
Try playing around with borders set on all the elements and see exactly what happens.
Sorry I can't be of more help.