Replacing multiple paragraphs with an element does not fully remove the paragraphs

[Joe Kavanagh]

1. Open the Ajax sample.

2. Create four paragraphs, for example:

<p>  paragraph one</p>
<p>  paragraph two</p>
<p>  paragraph three</p>
<p>  paragraph four</p> 

3. Select the two middle paragraphs.

4. Execute the following code

var anchor = editor.document.createElement('a');
anchor.setAttribute('href', 'http://dev.ckeditor.com');
anchor.setHtml('dev.ckeditor.com');
editor.insertElement(anchor);

Observe that the contents of the selected paragraphs have been removed, but the empty tags remain:

<p>paragraph one</p>
<p>&nbsp;</p>
<p><a href="http://dev.ckeditor.com">dev.ckeditor.com</a></p>
<p>&nbsp;</p>
<p>paragraph four</p> 

The selection should be fully replaced as expected.