Ah ha, thanks, got it. I should have read the help!

"If you want to select and edit the shape that contains the text, you can use Ctrl + click or right-click "Text inside" > "Select …" With the shape selected you can resize or edit it and then the text will re-flow within the new outline".

I still think in this particular case, ie vertically stretching a rectangle with text inside, it would be helpful if the padding margin didn't change.