XSL Transform CDATA into XHTML with Block Mark Up <p>

I searched for "line break" in the XML topic area, and found a number of threads on this subject of passing vertical white space out from XML to XHTML tags... but they are quite old (some 5 years old) and I've got points to spend and wanted to open this discussion anew, as I'm amazed this is so difficult and hoping there has got to be a simple solution as of June, 2005....
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Given XML that looks like this:

<audio_transcript>
   <header>
         <subject>Some Title</subject>
         <date_given>2005-01-01</given>
                 ## more header child nodes with other info...##
     </header>
<transcript_text>
<![CDATA[    

# note: source may have extra blank lines
#  *or* may have single CR's only -- char(10)
     
Conditions in the world today are certainly troubling,

New 2nd paragraph...  The shocking attacks in New York on  
September 11, 2001,

3rd paragraph... One of the immediate consequences of 9/11 was  
the television coverage etc.

]]>
     </transcript_text>
</audio_transcript>

How do we get an XSLT  transformation to tag these paragraphs with standard block mark up, where the XSLT has:

<div id="mainContentSection">
  <xsl:value-of select="audio_transcript/transcript_text" />
</div>

And the final XHTML output for web for that div wants to be a simple standard markup of:

 <p class="transcript_text">Conditions in the world today are certainly troubling, </p>

<p class="transcript_text">New 2nd paragraph...  The shocking attacks in New York on  
September 11, 2001, </p>

 <p class="transcript_text">3rd paragraph... One of the immediate consequences of 9/11 was  the television coverage etc.</p>

If we *can preserve the vertical white space in addition the <p> tags, so much the better, as it is so much easier to read and assess XHTML that "breathes" openly.

Sivakatirswami