I'm not sure that BF states that there is a "Standard Paragraph Format". 3-1 paragraphs are certainly more standard than blocked paragraphs. BF does state to follow print for whichever format is used...with the exception that if a book is done ENTIRELY in blocked paragraphs, the format may be changed to 3-1 as long as a TN is included on the TN page that states the change.
Regarding NLS issues...I would say to follow whatever directions are given. I am not an instructor but I did speak with our instructor about this and he states the same. Watch the directions carefully as the requested format changes for different lessons/exercises/drills.