I've stared using Eclipse again (it's been 4 years or so; I'm really impressed with the progress it has made).
At any rate, this message board declares auto-wrapping text isn't supported by 3.1:
Word wrap in Eclipse 3.1
Although that would be useful, somewhere it said that such a change would required a core rewrite inside of Eclipse. Which makes some sense, since newlines do convey some meaning to the compiler, and the source would be meaningfully changed by the editor for aesthetic purposes.
However, if you're running an older version, someone has stated that word wrapping is supported:
Line Splitting in Eclipse 2.1.3.