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blah blah blah     #line \
blah blah blah     #line - paragraph
...
blah blah blah     #line \
blah blah blah     #line - paragraph
blah blah blah     #line /

#!/usr/bin/perl
$file = shift;
...
s|<list>(.*?)</list>|"<list>".join("\n",map{"<item>$_</item>"}
    split"\n",$1)."</list>"|ges;
print;

perl -p00 -e 's|<list>(.*?)</list>|"<list>".join("\n",map{"<item>$_</i
+tem>"}split"\n",$1)."</list>"|ges;' textfile