As a version-control junkie, I subscribe to the view that (single) line breaks are the way of telling
diff what I want to see if something changes. Usually, this means one-sentence-to-one-line, since if something changes in a sentence then I want to see the whole sentence, but I don't want to see the whole paragraph. But sometimes it is a little finer than that: if I have a particularly complicated bit of inline maths then I'll separate that out using line breaks so that I can see if it's something in the maths or in the surrounding sentence that changed.
I use Emacs with longline-mode enabled so when editing a document, I get all the functionality of line-wraps (and paragraph reflows) with none of the grief from finding that I've messed up all my nice formatting.
When I converted to VCS, I had a lot of documents that were wrapped badly so I wrote a script to convert them to one-sentence-to-one-line mode. It's linked off this page (see Stage Two) which I wrote when making the switch.