Seems to me like they'll do it at some point. I remember all the people that used to say there would never be flying in Azeroth because of how much of a hassle it would be for Blizzard to practically re-work the entire world but look at where we are now. I remember watching a video of an interview with one of the peeps from Blizz, I think it was either an interview done by Wowcrendork or Jesse Cox and one of the questions was that if Blizzard had unlimited funds what would he want to do most for WoW and he answered a total graphical overhaul so I think maybe they'd like to improve the graphics as well but who knows.
On the other hand maybe it is just too much for them to be capable of. Even if they were capable of doing it I'm not sure everyone would be happy with it because WoW's graphics do have a certain charm imo. Not to mention that it may not even be worth it considering how much time and money it would probably cost them and with maybe only a few expansions left and the possibility of subscriptions dropping they may not want to risk it.
Anyway... what do you think?