The corrected diff is sent to standard output. Note that you will probably need to use the -l option when applying the patch, in order to ignore any whitespace differences there may be.
Some heuristics are used to decide whether use a space to recombine a wrapped line, or just join them together. Currently this is done by comparing with last three characters of a line with the first two characters of its continuation, and using a space if any of them are different.
The patch needs to have been valid before being word-wrapped.
The last line of a hunk is nearly always ambiguous. If the next line begins "@@", "Index: ", "diff " or "--- " then it is taken to be complete; otherwise it is unwrapped using the next line.
Tim Waugh <firstname.lastname@example.org>