It's quite clear that Microsoft has the resources and talent to support CSS2 fully in IE and that plenty of people have reminded them why this is important. So, why don't they do it? The fundamental reason, I believe, is that standards don't benefit monopolists. Accepted, well-functioning, standards lower the barrier of entry to a market, and is therefore a threat to a monopolist.

From that perspective, it makes sense to leave CSS2 half-implemented. You can claim support (and many journalists will believe you), and you also ensure that no-one can use the unimplemented (or worse: buggily implemented) features of the standard. The only way to change the equation is to remind Microsoft how embarrassing it is to offer a sub-standard browser. And to use better browsers.

Another reason for not making a IE too good is that it will compete with Windows. A modern browser is an application platform; the combination of HTML, JavaScript, CSS and DOM allows developers to target the web instead of Windows, Linux, or Mac.