They can handle conflict just fine, it's outright war that's out of the question as in order for it to be good it would require that one side wins while the other loses. What Blizzard has gone with, twice now, is that things just kind of unrealistically shrink back to status quo, which is just all-around unsatisfying bullshit.
Wrath did it well, providing Horde and Alliance their own bases, some hostilities, some cooperation. War was avoided through it all, skirmishes over Wintergrasp and Grizzly Hills resources being local disputes that got a bit messy. Scourge was still the main enemy and the reason Horde and Alliance were invading Northrend at all. There were even events that addressed the hostility and how it was handled, e.g. the Broken Front, where a rogue Horde commander sent his troops to stab an Alliance company in the back while they were busy fighting the Scourge; Garrosh of all people summoned this commander and gave him an earful about it.
They can keep things like this, hostile co-existence without it boiling over into an unwinnable war.