Well, I don't mind the paragraphs at all. In fact, I think the whole thing is perfect. Your writing style is exceptional. I'm so subscribing. Great two chapters - can't wait for more! (:
You need to separate different paragraphs. There should be a new paragraph each time a new idea is presented.
Readers are turned off when they click on a story, see a whole clump of writing, with no breaks. It makes it seem overwhelming and annoying, and long...in a negative way. They're more likely to click the back button rather than the comment or subscribe button.
Also: capitalization. I don't think I need to expand on that idea.
And just a reminder that every time a new person is speaking, it constitutes a new paragraph, no matter how short.
If you have problems with these things, then maybe you should just look for an editor. It will save you on stress.
I'm definitely subscribing.