I'm not sure I understand; if you don't care about the output then send it to /dev/null. If you do care then pipe it to an editor. A terminal is not a text editor (I mean, I suppose it could be, but that seems like a rather large scope change.)
As I said somewhere else, we have a concrete solution in mind for implementing folding as GP describes.
But hey; your time to spend :)
That seems like an incredibly common use case to me. It's common for a command to have a lot more output than I originally expected, and when it happens, I usually want to examine that output in detail. It would be great to retroactively be able to open captured output in a text editor, dump it to a file, pipe it to another tool, or collapse it.
I don't really want to edit the output in the terminal, but it would be great to be able to say "oops, do X with stdout from that last command, and do Y with stderr".