1) Compose a message in Thunderbird 3.1, in plain-text mode with all the default settings. Make sure that it wraps the paragraphs to several lines, and indent the first line of the paragraph with a tab (not with spaces). 2) Save that message as a draft or send it to yourself. 3) In the drafts, sent, or inbox folder, right-click on the message and choose "Edit As New..." See that Thunderbird has now inserted extra newlines where they don't belong, breaking the first sentence of every paragraph awkwardly.
Can post a screenshot of what you are seeing. In my testing, I see the same "wrapped at 72 character" composition that I see in the original composition. What appears as newlines is just the wrapped representation. I'm assuming that the following prefs are all in their original state: mail.compose.wrap_to_window_width mailnews.wraplength mailnews.display.disable_format_flowed_support I'm testing in : Mozilla/5.0 (Windows NT 5.0; rv:2.0b9pre) Gecko/20110101 Thunderbird/3.3a2pre ID:20110101030015 mail.compose.wrap_to_window_width might be interesting to you if you don't want to see the wrapped effect in composition.
Max did you tweak you prefs ?