It should be fixed now. It was also the case that multiple spaces inside on in-line <code> tags were not preserved. Now you can write "note the  extra space".

Note that a huge run of code containing no newlines and no spaces will (still) not get wrapped and thus will make the node too wide, just like a huge run of non-code containing no whitespace does.

Update: Actually, if you use a browser that supports soft hyphens (it seems that not much more than IE does so far, see Re: Space or Soft Hyphens (see code wrap), for example), then you might want to turn on "Auto Code Wrapping" in user settings so that long chunks of code w/o whitespace will have soft hyphens inserted even if the code is just part of a paragraph.

                - tye