If one executes the following in a graphical frame, the line will break:

(insert (propertize
           "\n"
           'display `(space :align-to (- right))
           'face '(:underline t))
          "\n")

(toggle-word-wrap 1)

If one makes the line one pixel shorter, it will work fine.

(insert (propertize
           "\n"
           'display `(space :align-to (- right (1)))
           'face '(:underline t))
          "\n")

(toggle-word-wrap 1)

Evgeni