1) Some mail programs will not do this (the good programs mainly).
I wonder why it would be a good trait for a mail program not to make the links live? Well, that's off topic here.
To Alec:
Mime types is the key. I use this as the last (header) argument for my mail() functions:
$header=sprintf("BCC:%s\nFrom: %s\nReply-To: %s\nMime-Version: 1.0\nContent-Type: text/plain; charset=\"us-ascii\"; format=flowed", blind_address(es), from_address, reply_to_address);
Replace the address pseudo-variables as you see fit and remove BCC if you don't use it.
This works for my purposes and makes the simple http:// links (no tags) live in most mail programs that I know.
Martin