@death.au had this idea at one point. Personally I think it’s too hacky, there’s lots of things under the hood that probably won’t work in a solution like this, e.g. selection, undo/redo history, etc.
Also like you said it’s partial – for example I don’t think people expect all inline LaTeX to get expanded to source when you start editing a paragraph. The polish of something like that wouldn’t match the rest of Obsidian, unfortunately, so we don’t plan to do something half-baked.