Does any Linux X terminal update line-wrapping on resize?

GNU screen does this, and supports curses properly. Run it in whatever terminal emulator you want: http://www.gnu.org/software/screen/

I would be surprised if tmux didn't automatically rewrap lines, too. tmux also supports curses; e.g., you can run vi in screen or tmux with no problems.

rxvt-unicode-256color version 9.07-3 (as provided by arch Linux) is confirmed to do this. The version of urxvt on my debian stable system does not. It should be easy enough to figure out how the ubuntu version behaves.

Other than that, the terminals I know of that will re-wrap are 9term, M-x shell in emacs, and a weird old app called xmlterm, which is a terminal emulator made using mozilla xul. Sadly what these have in common is that they do not support curses terminal control (ie. no running vi or nano or top or emacs or nethack etc. in these terminals). And other than emacs M-x shell they appear to not be actively developed (or even all that easy to find any more).

gnome-terminal supports this from version 3.11 on (since late 2013):

From the Phoronix website:

For long lines of text within the GNOME Terminal, when expanding the window's screen the word-wrapping will now automatically update. This is a change that should be found in GNOME 3.12 but there's still some developers evaluating its design, etc. The updated Terminal has already landed in Fedora (21) Rawhide for those interested.