attribute_view_gui using template for output rendering. You can override view template for this datatype in your design and remove unnecessary tag. Standard template is located in: design\standard\templates\content\datatype\view\ezauthor.tpl
As you said, I created new override for /content/datatype/view/ezxmltags/paragraph.tpl and deleted the <p> tag(this gave me the expected output), but now all the xml blocks are affected and all my paragraghs have been removed and formed a single block.
Is there any way, I can have two types of XML block, one with and the other without <p> tag?