The problem only happens with short lines (or rather, with lines containing short enough words), where the editor wraps a paragraph, leading it to fit as many words as it can into each line.
aaaaaaaaaaaaaaaaaaaaaaaaaa
bbbbbbbbbbbbbbbbbbbbbbbbbb
cccccccccccccccccccccccccc
Take this and block quote it:
aaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb cccccccccccccccccccccccccc
The editor actually produced:
> aaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb
> cccccccccccccccccccccccccc
So, yes, we could fix the editor to not do wrapping when quoting. The editor also messes up when unquoting:
> aaaaaaaaaaaaaaaaaaaaaaaaaa
> bbbbbbbbbbbbbbbbbbbbbbbbbb
> cccccccccccccccccccccccccc
Becomes, on unquoting:
aaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb cccccccccccccccccccccccccc
aaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb cccccccccccccccccccccccccc
Yes, this is an editor "feature".
Regarding splitting and merging: This is due to wrapping and the editor does it what it needs to do wrap correctly, so both splitting and merging happen. Consider the previous example with longer words, so that the line is long enough to wrap (you can see this from the scroll bars):
aaaaaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb cccccccccccccccccccccccccccccc
If I quote this:
aaaaaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb cccccccccccccccccccccccccccccc
> aaaaaaaaaaaaaaaaaaaaaaaaaaaaa bbbbbbbbbbbbbbbbbbbbbbbbbb
> cccccccccccccccccccccccccccccc
The editor automatically splits the line.