Bear in mind that they had such trouble getting Copland out the door. Thus suggesting that adding too many neato features such as preemptive multitasking and protected memory to the classic OS, while maintaining backwards compatibility, is neither easy nor pretty. I find it hard to believe that Apple's software engineers were idiots. Even Microsoft eventually realized the limitations of the 9x codebase, and harmonized everything under NT (starting with XP). So it goes with 9 vs. X.
9x never had a *true* iteration of protected memory.
9x always seemed to crash just as often as OS 9. Though at least Mac OS 9 has the common decency to not grind through your HD every 5 bleeding seconds, or spew goddamned DLLs all over the place. Don't get me started on the Registry or the massive security holes you could fly the Death Star through.
Anyways, maybe I'm wrong. It could have been totally doable, and the project was just really really REALLY badly managed (i.e. feature creep).
As for me, I'd be content with certain improvements outside of the "holy grail" features like PM and PMT. Especially if all the features from 8 and 9 were grafted into a System 7 branch.