99% of emails don't include formatting. 99% of users never set anything but "TO" instead of the anachronistic BCC and CC thingies (how many emailers even know what a "Carbon Copy" even is?)
On a handheld where real-estate is at a premium? Those features are tucked away semi-hidden. And for the sake of consistency, that UI is mirrored onto the web form.
Also, changing the subject of a reply is hidden for very good reasons - many applications use the subject of a reply for threading. Changing that subject line is going to break the user's expectations of how threading works. Even if Gmail handles the threading with grace, the e-mail client at the other end may not, and that can causes a mess of broken expectations. Better to leave this seldom-used feature (changing the subject of a reply) hidden to avoid the trouble.
The inability to fullscreen and the tiny composition window are, imho, unacceptable though.