Editing a text file with sed

[Joe Hart <j.hart@orange.nl>]

I am having trouble using sed to edit text files, heres a good example of what 
I am looking for:

<begin 1.txt>
This is a test
file, what I am
trying to do is get the lines to join.

It isn't a complicated thing,
but I also want to keep the paragraphs
separate.
</end 1.txt>

I try this command:

sed s/\n// / 1.txt > 2.txt and I get an error, so:
sed s'\n/ /' 1.txt > 2.txt and nothing happens.

I don't get it.  I though \n was end of line, which I am trying to replace 
with spaces.

I understand that this would loose the paragraphs, so ideally what I need to 
do is something like this:

1. Replace double line breaks with special sequence not found in text.
2. Convert all line breaks to spaces
3. Convert special seqeuence to double line breaks.

I thought sed would be perfect for this, but no such luck.  I can get what I 
want by using kwrite for step 1 and 2, then OO.o Writer for step 3. (kwrite 
seems unable to do step 3)

But ideally I'd like to just have a script to do it, but cannot figure out how 
to go about it, as sed doesn't seem to be working.

Joe