Instead, I have to go to properties > layout > window size > width and enter it manually. If you can decrease the width with the mouse, I would think that you should be able to increase it similarly. I'm using Windows 7 if it matters.
Because you can't? :)
Aside from something to do with the buffering of a mono-spaced, text-mode interface, I'm thinking only the Microsoft programmers are the ones who know the reasons 'why'. :)
You may have (also) noticed that if you shrink the window width, it doesn't actually affect the text width, it just covers it.
I don't believe I've ever seen an OS with a dynamically word-wrapping terminal window, so I don't think it's just Windows. :)