Brian, Your posting brings up a number of good questions. There are real problems and there may be some things you are not aware of.

1. Has Wolfram anywhere explained the difference between .wl and .m packages? Is the .m suffix deprecated? What is the difference in their behavior?

2. The .m and .wl files can have all the Title and Sectional structure that a regular notebook has. So it's possible to make a package file have a nice organization even including Text cells and not be just a lot of code more or less run together.

3. Like you, I like to develop routines in regular notebooks, usually where the need for the routine arose, and then after using it for a while I transfer it to a package file. I do this by having an established package and moving the routine into the package and making it a Code cell. I don't try to convert the entire notebook to a package because the main purpose of the notebook was not to be a package.

4. Hopefully, by this time, the routine will be relatively stable so there might not be much need to edit it. Nevertheless, sometimes there is and that's where some of the problems come in. If you are just making small fix-ups the best thing to just edit the Code cell. If you convert to an Input cell then indentation problems occur and it's not possible to nicely edit the cell. That's a problem that Wolfram should fix but I doubt if they take these things seriously. It's one extra little barrier in building applications, and applications could be the best thing about Mathematica.

5. You can reformat the Input cell by using Ctrl+Shift+N but that puts it all in a standard form and you have to add back all the line returns and spacing and reformat postfix statements and such things. It also gets rid of all comments. There is no really good reason to delete comments in this operation.

6. If you have some extensive routines that are really important, you could create separate development notebooks for each one and keep the current input form in its development notebook. Unprotect, develop and test it there and then copy it to the package.

It would be helpful, Brian, to know what your larger objective is in using Mathematica. It's not clear enough from your posting. If your objective is to study or develop capability in some subject area and Mathematica is just a tool and medium for doing that, then I have an extended essay A Mathematica Style at my web site that gives a lot of information on doing that: application structure, packages, style sheets, palettes and documentation with Workbench.

I think what you are aiming for is probably doable within Mathematica and WL. It is basically easy once you've had a little practice. Everything can look nice and be as neat and organized as you want. The only extra software you need is Workbench 3 if you want to do documentation. There is a certain lure of "computer science" for many users but unless that is your specific subject area you can leave all the computer science to Wolfram Research. That's what we pay them for. Resist turning interesting math or science into a vast computer science boondoggle.