how in illustrator to break a paragraph into separate lines/words/letters?

You can select all of your separtate text frames (paragraph, line of text, and letters, and go to the Type menu and select "threaded text". 

There is no built-in function to do this in Illustrator. Some aspects can be done with scripting, such as:

https://github.com/johnwun/js4ai/blob/master/divideTextFrame.js