The problem with text in an email (coded as text/plain) is the fixed width of a line. Lines in email aren't allowed to exceed 76 characters, so your email client will break down lines longer than 76 characters.
And that is bad, because I determine the width of my window/message. And not necessary as well. If the client would use the MIME header Content-Transfer-Encoding with as value quoted-printable, the text would flow like hell (open this example in your email client).
The discussed problem, probably is responsible for the now widespread use of HTML in emails. OK, it solves the problem. Text flows until a new paragraph (block element) starts or a <br> is issued. The type text/richtext works similar to HTML, according to line-breaks. The type text/enriched handles isolated linebreaks as spaces, and N consecutive linebreaks as N-1 linebreaks (This type is actually supported by Outlook Express). Check out if OE is not using HTML to render text/enriched
format=flowed parameter of the Content-Type header (short: f=f). Defined in RFC 2646. There's a FAQ and Eudora (email client, they designed it) has a tech-support document.
For indenting text (with the > character), I haven't worked out an solution. But here's my demo. Resize the window for the effect.