I had to take another shot at it. I noticed that comma was a sequence point, so you basically have the non-comma opening bracket match, and the comma match, which covers both closing brackets and unbracketed terms.

There may be some refactoring still left to do (update: did some more this morning), but I'm happy with it, and I need to go to bed. 

sub pp_new {
    my( $nextBit, $width, $EOS ) = @_;
    $string .= $nextBit;
    while( length( $string ) > ($EOS ? 0 : $width) ) {
        for (substr($string, 0, $width)) {
            my $pos;
            my $leftmargin = $indent x $depth;
            if (my ($bracket) = /^[^,]*?([\Q[{\E])/) {
                $bracket =~ tr/[{/]}/;
                if (my $closepos = indexBal($_, $bracket, $width)) {
                    $pos = $closepos + 2;
                }
                else { $pos = $+[0]; ++$depth }
            }
            else {
                $pos = 1 + (/,/ ? $+[0] : $width);
                $leftmargin = $indent x --$depth if substr($_, 0, $pos
+-1) =~ /([\Q]}\E])/;    
            }
            print $leftmargin, substr( $_, 0, $pos, '' );
        }
        $string =~ s/^\s+//;
    }
}

[download]
Caution: Contents may have been coded under pressure.

In reply to Re^2: Refactoring challenge. by Roy Johnson
in thread Refactoring challenge. by BrowserUk

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