More on this dialog's settings:
AutoFormat and AutoCorrect (Tame AutoFormat) by Suzanne Barnhill, MVP

The thing is, by pressing Shift+Enter, you are staying in the same paragraph. The indent acts on the entire paragraph, thus all lines in the paragraph. You may want to be using a hanging indent, where the first line is in the standard location, and further lines in the paragraph are indented.
See: Indents