I did the same thing with my site and IF you hold down the g button on the keyboard and do what you did I got the same results. THEN I actually typed in words and hit the space bar while typing words....like you normally would and it did line breaks fine like it's supposed to. If you copy paste this reply into your EXTRA infor box you will see it will wrap fine. It seems with out a space in between words the text wrap will not work. The code is in EDITUSER.php and it is line 367.
$bio_tarea = new XoopsFormTextArea(_US_EXTRAINFO, 'bio', $xoopsUser->getVar('bio', 'E'));

Ok, I believe I figured it out. Seems there were some illegal characters in the theme_block* files.

Try this and see if it fixes both the layout and text wrap problems. If it doesn't, let me know and I'll tackle it when I get back from class.

Best Regards,

JMorris