Changing the wrapping only changes the display of text. It does not change the connection between what you type and what gets sent to the server.
I suspect that what you are complaining about is that all text is assumed to be raw HTML. Well having an option to view it as formatted text might be nice (just steal from the / code-base) but is a somewhat separate problem. (For Netscape users such an option would be useless without the wrap attribute I just mentioned. To see what I want in action go to a site like kuro5hin, get an account, and try to post in Netscape.