We already use soft hyphens for wrapping code if you select "Auto code wrapping" in user settings. No, it doesn't work in all browsers.

What your test code doesn't check is whether the soft hyphens actually allow stuff to wrap. That would be the show stopper for using them always. If you view this node directly, then you can see my test for that aspect of things.

It would make sense to have a user setting for using soft hyphens instead of spaces for the chatterbox nodelet. Not really a big concern for me, personally, though.

Also note that using soft hyphens will result in more cases of people being confused when they cut'n'paste from chatter and don't get what they saw.