I used to use peat moss a great deal. I stopped when I read that harvesting of it was affecting some countries ecosystems. I read in this article that some countries do not have this problem.

Peat does seemto resist wetting. Once it starts to break down, I find it does much better.

"When it's dry, the chemestry of peat moss makes the tips of its fibers repel the water so that it can't reach into the spaces between them. But, if you get it just a little damp (either by mechanically forcing a little water into it by mixing or by placing it in an area of high humidity where individual water molecules as vapor can infiltrate their way into it) then there are some water molecules embedded in the fibers of the peat moss and their polar nature attracts other water molecules, overpowering the peat's chemical force of repulsion. It's sort of like priming a pump: adding a little water enables it to pump a lot more water.

One way potting soil companies overcome the problem of dry peat moss's repulsion of water is by adding a wetting agent to their mixes. Wetting agents, or surfactants, are molecules with one end that is attracted to water and the other that's attracted to nonpolar molecules like those in peat moss. They act like glue that holds two surfaces together that would otherwise repel each other. The wetting agent only needs to attract and hold a little water in the peat moss. After that, the process of hydrating the peat carries on by itself as explained in the previous paragraph."

http://www.waynesthisandthat.com/peatmoss.htm

Here is a link that might be useful: How to use sphagnum peat moss

Yeah, peat would be a terrible mulch - really counterproductive.

People used to mix it into the soil when planting or digging a bed, to lighten the soil, i.e. make it more porous, and add organic material. It turns out, as I recall, that it breaks down too quickly to have much of a lasting effect; the quick break-down also uses a lot of the available nitrogen in the soil. So, better alternatives have been found; compost and manure both provide their own nitrogen, while other materials that break down more slowly, like rotted bark, don't cause nitrogen depletion.

Like EvonneST, though, I stopped using it mainly because of environmental concerns. I'm interested (though a little skeptical) to hear that in some cases there's no problem harvesting the stuff.