It makes no such mistake. As clearly stated in the post, it requires that you have two paragraph breaks between the logical paragraphs; other than that - or inserting some other kind of identifying marker - there is no other reliable way of identifying where a given paragraph ends. That might entail adding an extra paragraph manually, where required, but that's trivial compared to the effort the macro potentially saves you.

Your suggestion of using a paragraph break followed by a capital letter isn't reliable, as:
a) sentences within a multi-line paragraph can start on a new line; and
b) sub-paragraphs (such as this one), which are separate paragraphs formatting-wise, don't always start with capital letters; they may also start with lower-case letters, bullets, numbers or opening parentheses, for example.

__________________
Cheers,
Paul Edstein
[Fmr MS MVP - Word]