We have re-analyzed the Galactic O-star sample from citet{puls96} by means of line-blanketed NLTE model atmospheres in order to investigate the influence of line-blocking/blanketing on the derived parameters. The analysis has been carried out by fitting the photospheric and wind lines from H and He. In most cases we obtained a good fit, but we have also found certain inconsistencies which are probably related to a still inadequate treatment of the wind structure. These inconsistencies comprise the line cores of Hγ and Hβ in supergiants (the synthetic profiles are too weak when the mass-loss rate is determined by matching Hα) and the ``generalized dilution effect'' (cf. citealt{vo89}) which is still present in He I 4471 of cooler supergiants and giants. Compared to pure H/He plane-parallel models we found a decrease in effective temperatures which is largest at earliest spectral types and for supergiants (with a maximum shift of roughly 8000 K). This finding is explained by the fact that line-blanketed models of hot stars have photospheric He ionization fractions similar to those from unblanketed models at higher Teff and higher log g. Consequently, any line-blanketed analysis based on the He ionization equilibrium results in lower Teff-values along with a reduction of either log g or helium abundance (if the reduction of log g is prohibited by the Balmer line wings). Stellar radii and mass-loss rates, on the other hand, remain more or less unaffected by line-blanketing. We have calculated ``new'' spectroscopic masses and compared them with previous results. Although the former mass discrepancy citep{h92} becomes significantly reduced, a systematic trend for masses below 50 Msun seems to remain: The spectroscopically derived values are smaller than the ``evolutionary masses'' by roughly 10 Msun. Additionally, a significant fraction of our sample stars stays over-abundant in He, although the actual values were found to be lower than previously determined. Also the wind-momentum luminosity relation (WLR) changes because of lower luminosities and almost unmodified wind-momentum rates. Compared to previous results, the separation of the WLR as a function of luminosity class is still present but now the WLR for giants/dwarfs is consistent with theoretical predictions. We argue that the derived mass-loss rates of stars with Hα in emission are affected by clumping in the lower wind region. If the predictions from different and independent theoretical simulations (citealt {Vink00, Paul03, puls03a}) that the WLR should be independent of luminosity class were correct, a typical clumping factor <ρ2>/<ρ>2 ≈ 5 should be derived by ``unifying'' the different WLRs. Based upon observations obtained at the INT and the European Southern Observatory, La Silla, Chile. The INT is operated on the island of La Palma by the ING in the Spanish Observatorio de El Roque de los Muchachos of the Instituto de Astrofísica de Canarias. Appendix A in only available in electronic form at http://www.edpsciences.org