I should have written, "It would preclude the underlying Word functionality, which MS won't do, even if such an update would support the HTML standard."
I didn't want to imply that the "Word functionality" utilized in Outlook 2007/2010 supports the HTML standard. Problem is, it doesn't. That is why your animated gifs don't animate.
MS has the view that for most email messages, that capability, which has existed for quite some time and still functions well in other email clients, is not an important enough feature to include as it would create issues for those tying in Word as their Outlook editor/reader.
Hope that makes my first post clearer.