After some googling I found that following three entries in user.js (use wordpad to creaste it if using Windows): are needed:

	user_pref("mail.quoted_graphical", false);  
	user_pref("mail.quoteasblock", false); 
	user_pref("mailnews.display.disable_format_flowed_support", true);

The folder where user.js lives is something like (in Windows XP):
C:\Documents and Settings\\Application Data\Mozilla\Profiles\default\XXXXXXX.slt

However even after doing that, I didn't have success. Netscape 7.1 has several options for dealing with plain text (even better than 6.2). Once I set those, life was good. Here are the options I changed:

• edit -> mail & newsgroups account settings -> clear compose messages in html format box
• edit -> preferences -> mail & newsgroups -> message display -> plain text messages -> select fixed width font.
• edit -> preferences -> mail & newsgroups -> composition -> Defaults for HTML Messages -> Fixed Width font
• edit -> preferences -> mail & newsgroups -> send format -> select Convert message to plain text