trouble indenting looooong lines with visual-line-mode

[Allan Gottlieb]

(I am using emacs 23.1)
Start with emacs -Q and a buffer in fundamental mode

Consider a line wider than the frame, for example

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

which exceeds an 80 column frame.
Now assume you have a short line say
yyyy
followed by the above long line, i.e.
yyyy
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

So far so good.  Now indent the long line with say one space.
If visual-line-mode is OFF, I see what I expect, the long line is
preceded by one space.

But with visual-line-mode ON, a blank line appears on the screen between
the short and long lines, i.e. the long line (with only one word) was
wrapped.
This behavior seems wrong.  I am getting burned in the following case
among others with html

<ol>
  <li>
    <a
      href="a-looong-url-that-naturally-contains-no-blanks">
      go here
    </a>

When the looog-url exceeds the line length a blank line appears
after the <a

I realize the blank line is not in the file so the browser is not
affected, but I find a plus of html to be that it reads well in emacs
even when not formatted (by say w3m).

Am I correct in viewing this as a bug?  If so I will file a bug report.

thanks,
allan