I am using the "type on a path" tool to write around a circle, but in addition to changing the position/rotation of letters, I'd like to curve the letters themselves. As in, if I put a row of underscores, they should form a circle without jagged edges. How do I do that? Thanks!
You are not going to get a smooth line via several underscores. That's simply not how underscores work. You would need to draw any relative curved paths if you want a smooth line.
Each type glyph is merely rotated to align its baseline with the angle necessary for the underlying path. There's no method, using Type on a Path, to curve or distort type glyphs. Each underscore is a single type glyph. In order for underscores to form a true arc, the underscores would need to be combined so that the left side of the glyph was aware of the location of the right side of the previous glyph. That's not going to happen. You can't "combine" type glyphs in any automated fashion for Type On a Path. And Type on a Path will not distort any type glyph in order to mimic any curvature of the underlying path.
It's generally a better idea, for anything, to actually draw a path as opposed to using multiple underscores.
If you need type to curve, then using Envelope Distort may be a better option. Here's the same text, set straight, with underscores, then an Envelope is used to arc the text object.
Envelopes will "curve" or distort text, but not always in desired ways without additional effort.