<<Not a single agent or editor I've written for or submitted to has ever asked for underlining rather than italics, or commented on my use of italics rather than underlining. >>
No, and they probably won't, even if that's what they prefer. Especially magazine editors. Pieces for magazines are almost always short, and fairly easy to edit.
But you need to understand that such things are seldom the territory of the edior, and aren't done just for the editor. Editors are very, very seldom the ones who turn something from a manuscript into a published piece.
Screwups that happen in published pieces, typos and the like, often happen precisely because of such things as italics instead of underlining.
And very few magazines writers ever see a copyedited version of their manuscript, so they miss seeing where the ediotr has underlined the italics, which most do.
And, of course, many magazine editors have gotten around this problem by asking for some form of electronic version of a story or article that has been accepted. With this, they can print out and edit as they see fit. But novels are a whole nother story.
<<Proofreading marks to indicate italics (if I remember correctly) is more than just underlining what you want italicized. You also have to indicate "ital" in the margin next to the line that needs it. >>
The "ital" is the magin note, but it isn't necessary for the writer to put this in. It never has been. Every editor, and every copyeditor in the world knows what underlining means, even without the margin note. I'd be surprised if there's an editor alive who doesn't know. I've certainly never met one. And hope to God I never do.
<<I was always taught that proofreader's marks go in the margins, never in the line of type itself (hence those generous margins). All that goes in the line itself are lines (underlines, deletion lines, transposition lines), carets, and maybe the occasional circled or bracketed word.>>
All the things you mention ARE proofreader's marks. They come in two varieties, the ones you use in the line of type iteself, and these do take more room than Times easily provides, and the proofreader's marks that go in the margins.
But carets, brackets, and many other marks, are proofreader's marks. There are forty-two commonly used proofreader's marks that go in the lines themselves, and I can tell you from a good deal of editing experience that I hate like blazes trying to use them with Times New Roman. You have to be extremly precise in where you place one of the copyeditor won't know what to do.
It isn't so bad in a very short manuscript, if I don't like the font, I'll scan it and change it, but in something novel length, well, I simply won't do it.
All I can tell you is to look around at the many, many up to date guidelines availble all over the internet. They're pretty much unanimous to saying to use Courier, and in saying not to use italics in a manuscript.
It isn't that you can't get away with it, you can. Just like writers working on typewriters used to be able to get away with using Elite, rather than Pica. But even in this day and age it can still be a pain in the butt, and can cause problems somewhere between the manuscript and the published piece.
Some things never change. One of them is the size of Times New Roman. It bunches way the heck too many words on a page. The industry standard is also still to count each page as having 250 words, and you can't do this with Times, either.
You can only do this with Courier 12, one inch margins, and twenty-five lines per page.
There are up to date guidelines all over the internet that preach over and over to use Courier 12, and to underline in a manuscript. Editors expect writers to read these. It makes life easier for everyone. But editors aren't going to complain to writers who use Times and who use italics. Life is too short, most writers get it right, anyway, and some editors don't care. Most copyeditors, on the other hand, do care. But they come on down the line and seldom get the chance to say anything to the writer, at least until it's way too late for such things to matter.
The truth is, the only reason Times has become popular is because word processors come defaulted to Times. Word processors were not designed for professional writers and editors, but for students, professors, and scientists. But since word processors are defauted to Times, many new writers use it. Editors are simply throwing in the towel because of this, but in print, Times is just a pain for many editors to edit and read, especially in long manuscripts.
I only know two editors who reject anything that comes in in Times, but I know a lot of editors who really wish it would go away, even though they sigh and read it. And I know one, Robert J. Sawyer, who has quite a rant somewhere on his website about writers who use times and italics. I do know one print editor who prefers Times, but she's a definite minority.
Same thing with italics. It's just too easy to overlook them, especially when an editor is trained to look for the underline. That underline only means one thing, "put this in italics." And you can't miss seeing it, like you can actual italics. When a writer uses actual italics, every editor I know goes through the manuscript and underlines those italics so the copyeditor won't miss them.