Looks like you've uncovered a bug - or rather an asset which hasn't been updated in a while. To fix it, select the Gradient Font object in Unity (TK2DROOT/tk2d_demo/demogradientfont/GradientFont), and click Commit.
The wrapping should work correctly now.
It will work correctly if you create a new font.
I've fixed the built in asset for the next version.