So, feel free to confirm yourself with xterm -rw or resource/default or
menu setting of reverseWrap, but with your patch and reverseWrap enabled, I
get incorrect behavior of a different sort.  The cursor is not left
immediately after the 2, but there is an intervening blank space of exactly
1 character.  Flipping the menu item on/off and hitting enter in the shell
to force a refresh toggles the misbehavior.

As to whether this should be a "supported configuration", well that is for
the larger audience to decide.  Obviously for N config bools there are 2^N
configs and supporting them all is probably between impractical and
impossible.  However, the xterm man page under the -rw option section says
this one is specifically encouraged:

    This is very useful for editing long shell command lines
    and is encouraged.

I'm not sure why reverseWrap is not on by default..You'd have to ask Tom
Dickey that, but I would guess it is to support some popular shell/usage
mode.  Or maybe the feature and documentation are vestiges from some long
bygone era.  I haven't looked into it much.

In better news, I also got things to work both with/without your patch in
emacs shell mode under X11 emacs as well as terminal mode emacs -nw.