Back in version 4.12a, Pegasus allowed multiple user accounts under one iteration of Pegasus. Changing users was easily done from a File drop-down. In later versions, that option went away and multiple accounts required multiple Pegasus programs to be running. That, alone, sent me back to version 4.12a where I have been since the latter 2000s.

I would like to upgrade to a later version that has some HTML support but am reluctant to make the change because of the multi user issue. Has that change been backed out of Pegasus? I can upgrade and then reinstall 4.12a but I'd rather just ask first.

This has not changed. A new instance of Pegasus Mail is required in order to switch users. I believe that the most convenient way to work with multiple users is to create a desktop shortcut for each user. That shortcut can specify the username and can also contain an option that allows for multiple sessions of Pegasus Mail. This allows you to run multiple sessions, each as a different user (just don't run multiple sessions as the same user).

This is what the shortcut would look like:
C:\PMAIL\Programs\winpm-32.exe -ms -A -i {username}

The -i option specifies the username that Pegasus Mail should start up as.
The -ms option tells Pegasus Mail to allow multiple sessions.

If you use multiple identities you can also have Pegasus Mail start up as the desired identity by adding the -id option (eg: -id {identity}.

Can you achieve what you want by just using multiple identities (Tools > Identities) and setting the options and internet options separately for each identity?

And the dropdown menu to change identities is still available in same way as in the older versions. I still using it with current version and just one instance of pegasus mail.
If it will not apear in the toolsbar then you have to change perhaps he style of the toolbar, under settings > userinterface.