A new engine always comes with consequences. That said, the changing of vanilla wow could usher in a new engine easier than having to still support it. SoE tried to change out the whole engine, and failed miserably at it. Blizz has been steadily increasing the poly count in the world and on the player armor for years now (look at vanilla armor vs the greens in Northrend) and upping the quality of the base player models is hopefully in the works as well. In the original beta and stress test the poly count for the players, along with animations, were MUCH higher than in release. I believe they reduced the poly count and texture details in release to support more systems.

As you stated, the engine has done well for Blizz for years, and honestly the engine is the paper of the story. Just like replacing the paper with a higher quality variety doesn't add to the content of a book but may subtract, just having a higher quality graphics engine doesn't automatically add to the content experience but may make it a lot more difficult. Honestly I have an easier time with the suspension of disbelief when the content is a little less detailed, personally.