This feature request doesn’t appeal to me at all. I find the current live preview perfect just the way it is. And I think it would be a huge mistake to take Obsidian down the rabbit hole of trying to add rich text as an option—it’s just not as future-proof and interoperable as plaintext is.
But I think there could be a third editing option besides source mode and live preview—call it “hide codes”—that completely hides the markdown characters, which would disappear as soon as they’re typed or entered with keybindings or buttons. If someone using it needed to see the codes for troubleshooting, they could temporarily toggle into source mode.
That would drive me crazy, but this feature request is popular enough that a lot of users would probably prefer it as a third editing mode option.
It might even be possible to implement with a plugin, but most people with the coding skills to write plugins want to see the codes, and probably won’t be motivated to spend unpaid time writing and maintaining something they wouldn’t use themselves.
EDIT: The risk of adding a “hide codes” option would be that some people using it wouldn’t bother learning enough markdown to understand how to fix basic formatting issues themselves, leading to an influx of trivial requests for help on the Discord and here on the Forum, and increased burden on the moderators and other volunteers.