Ok try this.
Click in the cell you want to write text in, then from the menu click Format > Cells > Alignment tab, then place a check in the box 'Wrap text' and click OK.
Now start typing in the cell and you will see that the text will fill the cell in the manner you described.
Hope this helps. Let me know if you have any questions.
If you are able to do it in some cells you should be able to do the same in all cells unless there is some protection on these cells. Try copying the cell in which the wrap works to a cell that is giving you a problem you should be able then edit the text in the new cell.
You can change the font format (i.e. color, size, etc) of any part of the text within a cell, but you cannot apply background color to only part of the cell . To do this select the cell then go up to the Formula Bar, highlight the part of text that you want to format then click on the font color or font size or bold italic etc. When you press enter you will see the changes taking effect in that cell.