I suspect that I could much improve upon this, though at the minute this is the best I can offer (albeit I think that some kind of replace might work more efficiently):
var $words = $('p').text().split(' ');
for (i in $words) {
    if ($words[i].indexOf('http://') == 0) {
        $words[i] = '<a href="' + $words[i] + '">' + $words[i] + '</a>';
    }
}
$('p').html($words.join(' '));
JS Fiddle demo.
A slightly improved version of the above (but good lord, it's ugly...):
var punctuation = ['!',"'",'"',',','.'];
$('p').each(
    function(){
        $words = $(this).text().split(' ');
        for (i in $words){
            if ($.inArray($words[i].charAt(0),punctuation) > -1 && $words[i].indexOf('http://') == 1){
                alert($words[i]);
            }
            else if ($.inArray($words[i].charAt($words[i].length - 1),punctuation) > -1 && ($words[i].indexOf('http://') == 1 || $words[i].indexOf('http://') == 0)){
                $words[i] = '<a href="'+$words[i].substring(0,$words[i].length-1)+'">' + $words[i].substring(0,$words[i].length-1) + '</a>' + $words[i].charAt($words[i].length-1);
            }
            else if ($words[i].indexOf('http://') == 0){
                $words[i] = '<a href="' + $words[i] + '">' + $words[i] + '</a>';
            }
        }
        $(this).html($words.join(' '));
    });
JS Fiddle demo.
I'm not quite sure what to do about quoted links, though (text such as "http://google.com", for example); and, honestly, I think that regex is probably the far, far better approach to this problem.