When scroll-step is set to 1, the screen is supposed to scroll one line at a time.
Whenever a word-wrapped line is reached (e.g. when such a line is beneath the last visible line and the arrow keys are used to scroll down to it), the line and cursor jump to the middle of the buffer.
What I expect to happen is that the wrapped line will be shown in full on the edge (top or bottom) of the screen.