I like that the long lines are displayed over more than one terminal line; I don’t like that vim inserts newlines into my actual text. Which part of .vimrc I should change?
You may find set lbr useful; with set wrap on this will wrap but only cutting the line on whitespace and not in the middle of a word.
set lbr
set wrap
e.g.
without lbr the li ne can be split on a word
and
with lbr on the line will be split on whitespace only