A look into the description and rationale sections of POSIX, which
often provides helpful information, was not possible because fmt(1)
is not part of POSIX (only fold(1) is). Why's that?
It was not in SVID and nobody from the BSD side of the war at the time felt it was worth arguing about to add it to the standard. Basically, during the writing of both POSIX.1 and .2, there was huge pressure from AT&T to just take the SVID and try to make that the standard. In fact, IIRC, Jim Issack got AT&T to release the copyright on it and we used some of the original AT&T troff source.
But many of us pushed back saying even if there was a marketing campaign: "AT&T UNIX®, Consider it Standard" it was not hardly so. And many BSD additions (improvements) were taken into the standard. For instance, sockets was the prefered to networking interface, although to save face AT&T managed to get the TLI allowed in as an alternative to sockets in the first version of the network specification. (Funny, I don't know of a FIPS-151 registered UNIX implementation that used TLI).
Remember, the primary driver for the POSIX work was for the ISV's - to make it easier for them to create software that they could sell.
Early on, Heinz in particular, wanted an ABI, not an API (many of us, myself in that camp) shouted him down. Since those days, I've sometimes wondered if we had earlier on figured out how to do that; maybe the UNIX Wars would have worked out differently (but thats a different discussion).
Back to fmt(1), like you, I have used it for years, particularly in email. I usually forked it from vi to paginate my message was what I did for years until I finally switched from mh (actually the hm version) to the Gmail interface as my MUI client.