Hm, I just tried it in Chrome and it does the same thing. For instance, if I quickly write

Hey, I'm a banana.

And then wrap it in the wrong font by mistake, when I press Control Z I expect it to get rid of the formatting. It doesn't. It Control Zs back further than that and gets rid of not only the formatting, but the text as well. I'll google to see if it's a browser thing or not. It's just that Pe2k didn't do that; it only ever Control Z'ed the last thing I did.