One of the things I don't think I got taught in grade school/high school was how to cut my paragraphs. The usual routine was that the teacher would ask us to take out a sheet of paper and write a one-paragraph essay on a certain subject matter (i.e. "your summer vacation"). While not horrible in itself, it left an imprint that paragraphs are these long, clunky blocks of text when they needn't be so.
A paragraph can be as short as one sentence.
Or as long as you need it to be. It all depends on what you're trying to evoke, on what you're trying to accomplish. The one-paragraph rule for essays isn't bad but it limits what you can do.
Another reason to break up your novel-length paragraph is to make it easier to read. Books are intimidating as it is. Even a veteran reader like me feels threatened when I see a huge block of text that has no end. It's hard to find the perfect place to break one's line of thought. It's about as difficult as reading a sentence that has no period or comma. And perhaps that best describes the role of chopping up paragraphs: it's about as integral as the period of the comma. It's not simply about pacing the reader. It incorporates a lot of things, from subtlety to emphasis. The uninitiated might think text is text and whether I end the paragraph here or I end it there won't make a difference. In some cases, the change is minute. At other times, it's not. So it's quite important to pay attention.
My other experience with paragraphs during high school, aside from writing those one- and two-paragraph (they increased the requirements!) essays, is writing the news articles for the school paper. Now what's interesting about news articles is that when it comes to paragraphs, it's the opposite of what's usually required in English class. A news article is composed of several paragraphs, each one short but concise. My favorite part was the lead, the first paragraph in every news bit: it's usually just one sentence but must contain all the important facts, namely who, what, where, when, why, and how. Everything else after that is just icing on the cake. (There are two schools of thought when it comes to news writing however--there's the inverted pyramid where a bulk of the information is on top, and the pyramid where you slowly dish out the important information. I'd go for the former though considering the nature of the newspaper and the fact that not everyone will read the article to the end. They shouldn't find out only at the end that Soylent Green is made of people.)
I'm not proposing people's paragraphs be as short as news articles. In the end, how long or how short your paragraph is best left to you. I've seen paragraphs that are three pages long and it works. I've also seen a paragraph that's merely one sentence and it's successful in the context that it's used in. But the thing is, they don't teach you this at school (at least not back then and not in the school I went to). You'll have to figure out the perfect formula for yourself. And more often than not, it'll come naturally to you by reading, reading, and doing more reading.