I always thought that was a bullshit excuse. They could have emulated it. Its not like 16-bit apps are on the bleeding edge of performance. Still nobody else is supporting 16-bit applications at all anymore so you have to give them credit.
What's the cost/benefit of that? How much would it cost to build it and how much could they make?
You can theoretically do ANYTHING... but a business exists to make money...
Why does Microsoft support 16bit? because - without a doubt - someone is paying them for that "extra" support.
As I said... there are many reasons - and a company exists to make money.
If they decide not to do something that doesn't make them money? It's not a hard reason to see why...