Michel Fortin has just released an enhanced version of his PHP port of John Gruber's Markdown. If there's enough interest, I will port the Extra version as a new Vanilla extension.
Just use markdown on here. Some of the hyperlinking stuff doesn't work. It does wierd things where it misses carriage returns unless you hit return twice. Stuff like that. Really pisses me off.
I use Markdown here and on my own install. Never ran across these problems myself. Markdown under Serendipity does some strange things sometimes. But that is one borked piece of software if you ask me. No offense to any users or whatever in here. I'm using it, or at least taking it for an extended test drive.
Something to do with how br /'s aren't "good form" or something like that. (Don't quote me on that... I vaguely remember.) They provide you with a way around this feature, though. Instead of writing the line and then a carriage return, put two or more spaces at the end of the line before the carriage return. When you do that, it'll respect your wishes and put a br element in there.