WYSIWYG editors and rendering engines aren't things I know about so I wonder if there have been difficult engineering issues at that time or if they just went at it from a business standpoint of "people see mail like letters so they are documents for which we have word so let's use that".
//Edit: Looks like they were mainly interested in providing a great WYSIWYG experience using tools users are already familiar with: https://web.archive.org/web/20110311083708/http:/blogs.offic... great quote: "There is no widely-recognized consensus in the industry about what subset of HTML is appropriate for use in e-mail for interoperability. The “Email Standards Project” does not represent a sanctioned standard or an industry consensus in this area. Should such a consensus arise, we will of course work with other e-mail vendors to provide rich support in our products." - I guess their argument could be that there still is no "HTML standard for email" so they don't have to support anything they don't want to?