"Not capable" can have two meanings. First, you could mean that Microsoft engineers lack the skill and ability to make a better calculator or text editor. Second, you could mean that Microsoft's hands are tied by a variety of reasons (legacy support, antitrust concerns, etc).

I know it's popular to assume Microsoft's incompetency, but that's not the case here.

Many engineers internally have proposed changes and provided patches that could drastically improve the functionality. However, the gatekeepers are incredibly conservative. Not only do they have to consider the legacy issues, but they also have to consider all of the ISVs who would kick and scream about anti-trust. The subset of the customer base who would truly appreciate a better notepad do not justify the risks.