Most of these settings are tested with Mutt 1.4 (specifically, 1.4.2.3 as included in Owl at the time of this writing):

# Make Mutt use us-ascii when the content is all 7-bit, otherwise use koi8-r
set charset="koi8-r"
set send_charset="us-ascii:koi8-r"

# When viewing and replying to messages that use windows-1251, make Mutt recode
# them to koi8-r
charset-hook windows-1251 cp1251

# Mutt will save received & sent messages here
set mbox="~/Mail/received"
set record="~/Mail/sent"

# Disable sorting
set sort=mailbox-order

# Set the desired default "from" address for both header From and envelope-from
set from="you@openwall.com"
set hostname="openwall.com"
set envelope_from=yes
set use_domain=no

# Recognize these as own addresses for displaying +/T/C marks on messages, as
# well as for the reverse_name setting
set alternates="you@openwall.com|regexps-for-your-other-addresses-may-go-here"

# When replying to or forwarding a message sent to a recognized own address
# (see above), reuse the same full name and address that the message was
# addressed to as the new "from" address
set reverse_name=yes

# Maybe use ~/tmp instead of /tmp - useful when /tmp is on tmpfs, to not lose
# edits on power failure
#set tmpdir="tmp"

# Decode and/or decrypt messages when searching (much slower and prompts for
# passphrase on first encrypted message encountered)
#set thorough_search="yes"

# Use this when "ispell" is actually the "aspell" wrapper (press "i" to invoke)
set ispell="ispell --mode=email"

# By default, Mutt adds the original sender's address to Subject on forwards,
# which we usually don't want
set forward_format="Fwd: %s"

# Don't display these headers by default (press "h" to display full headers)
ignore Delivered-To X-Delivery-ID X-Priority X-MSMail-Priority X-MimeOLE X-Spam-Checker-Version X-Spam-Level X-Spam-Status Precedence X-No-Archive List- DomainKey-Signature In-Reply-To User-Agent DKIM-Signature X-Google-Sender-Auth

# Highlight the obfuscated e-mail addresses in our RPM %changelogs, etc.
color body brightcyan default "<[-a-z_0-9.+]+[- ]at[- ][-a-z_0-9.]+>"

# If you're using a local SpamAssassin bayes database, you might want to bind a
# key, such as Shift-S on the index, to invoke sa-learn and mark messages as
# deleted.
#macro index S "| sa-learn --spam --no-sync --single\n<delete-message>" "spam learn"

# ...append /usr/share/doc/mutt-1.4*/gpg.rc to here

The following additions were taken from (GalaxyMaster)'s .muttrc:

# Use a wrapper script around an editor to do some checks after editing a message.
# Currently the mail-editor script contains two lines:
# vim -c 'set ft=mail' "$1"
# aspell -e -c "$1"
# The first line invokes vim and enforces the e-mail filetype (this allows to apply
# the auto-indentation to the message, yet the quoted text will be untouched).
# The second line calls the spell checker which will skip quoted portions of the
# message.
set editor = "~/bin/mail-editor"

# Use aspell directly, not via its ispell wrapper
set ispell="aspell -c --mode=email"

# Save one line of the context during scrolling
set pager_context = 1

# Show 6 lines of message subjects above the message you read
set pager_index_lines = 6

# Stop at the end of the message, do not jump to the next message
set pager_stop = yes

# update the message counter every 1000 messages (helps to speed the starting time
# up on a slow link, e.g. over GPRS)
set read_inc = "1000"

# ditto for the write counter (e.g. on exit)
set write_inc = 1000

# unbind x so there will be no chance to exit mutt incidentally
bind index x noop

# use Tab to jump to the next unread message and ,+Tab to jump to the previous unread
# message.  I find it more usable than the default, which is to jump to the next
# new message.
bind index \t next-unread
bind pager \t next-unread
bind index ,\t previous-unread
bind pager ,\t previous-unread

# a small helper to present user with a selection of names/addresses to use in
# the From field.  It's bound to the 'v' key.  The get_my_ids script is a one-liner:
# cat -b ~/.mutt/identities | sed 's,^[[:space:]]*\([[:digit:]]\),alias _id_\1,g'
# It's possible to squeeze it into .muttrc, but it was easier to create an
# external file and put the complex command there.  The identities file has the
# same format as aliases, i.e. "email@domain.tld (FirstName LastName)").
macro compose v "<enter-command>source '~/.mutt/bin/get_my_ids|'<enter><edit-from>^U_id_<tab>" "Select from"

We commonly use the VIM text editor along with Mutt. Please refer to the page on .vimrc settings, which describes some of those relevant to editing e-mail messages.