Wikimedia Bugzilla is closed!

The current implementation is done with consideration for the use:
# A
# B
# C

# 1
# 2
# 3

If this were to change in the way you are mentioning then the ability to use multiple numeric lists on a page after each other would become broken. And would thus break likely current uses.

Additionally a blank line has always been a marker for a new paragraph, so new lists being started should be expected as there is a blank line in between them signaling that there shouldn't be any relation to each other.

No, the current implementation was done by accident. There is no unified set of principles from which MediaWiki wikitext could be derived. It's a mishmash of principles and source code shortcuts. 

If for some reason you want to have two numbered lists, with only a blank line separating, and no text introducing the second numbered list, you could use:

# A
# B
<nowiki></nowiki>

# C
# D

But I can't imagine why anybody would want to do that. There should always be some text in between the two lists, explaining why the list numbering is being restarted.

To speak in positive terms: the reason for allowing blank lines in between list items is to allow the author to visually separate the items in the wikitext source. A single character at the start of a line is not easily seen when the list items are long lines, wrapped many times. 

Some authors attempt to separate their list items in this way already, assuming that MediaWiki will understand what they mean. Those people are rightly surprised and disappointed when they discover it doesn't work. See for instance bug 13194. 

In some implementations of markup languages (E.g. IBM's SGML/Script VS), they have the notion of a compact vs non-compact list.  I've often wished for such a capability in wikitext.  Unfortunately, there's no "start list" wikitext as there is in HTML so allow me to use an HTML-like notation to demonstrate:

<ul compact>
<li>Blah 1
<li>Blah 2
</ul>

would produce:

*Blah 1
*Blah 2

while:

<ul>
<li>Blah 1
<li>Blah 2
</ul>

would produce:

*Blah 1

*Blah 2


Obviously, some kind of change in notation would be required in wikitext that could be awkward to sort out and have backward-compatible.  Someone might be able to think of a way of doing this with a bit of CSS and a convenient notation - maybe:

*Blah 1   versus  *open|Blah 1

where the latter uses a CSS that adds padding below to provide space.  If the name between the * (or#) and the pipe is perfectly general, Mediawiki:Common.css can be used to create different variants of spacing or formatting of lists.

(In reply to comment #3)
> In some implementations of markup languages (E.g. IBM's SGML/Script VS), they
> have the notion of a compact vs non-compact list.

Please submit your unrelated feature requests as a separate bug report, not as a comment on an existing bug report. 

1) The above idea of a non-compact list can easily be had by wrapping a normal wikitext list in a <div> with an approprate class= attribute and some simple CSS.

2) IF someone deals with redoing some of the list generating code, please see also bug 13642 which might be solved with the same code.

*** This bug has been marked as a duplicate of bug 9342 ***