Incompetence is something I'd very rarely attribute to Blizzard. Although Diablo 3's buggy launch had me wondering until they fixed it with RoS.
I think the entire ground-only design(and all it's various aspects, gimmicks, and attempts to avoid better methods) are deliberate. If we were only talking about WoD I might say it was just incompetence. But two expansions in a row? That's a pattern of behavior.
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What would you think of a Pathfinder-like system where your mounts start out with only the basic movement we have now, but then had other abilities that could be unlocked as you progressed through various achievements or challenges around the expansion? Think of things like unlocking artifact skin challenges we're seeing right now, or the Green Fire quests.
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I LOL'd!
It does look pretty ridiculous as a horse, but what if it was a spider(AQ Battletank?), or lizard? Wouldn't that make more sense?