Jokes are the unit tests of our understanding. Sure, the gag "fails", but it makes the point of the general usability of the infamous Lisp-machine-in-editor-drag.

"decent" or "great" are personal emotional responses, they cannot be true or false

As an Emacs user, I have always hated that joke. It's not funny, because, as you said, it is untrue. Emacs is not only a great editor, but it's also a terrible operating system, lacking multitasking and error recovery in particular (although it's getting better).

It's a joke, it doesn't need to be true, only to have a kernel of truth like all good jokes. And as a recent Emacs convert after years of vim I must say that kernel is there. The breadth and scope of Emacs is extreme. Talking seriously it's obviously not an OS, but it's not an editor either. It's a framework for people to build their editors on. While vim for example is a great editor right out of the box and even the best evil integrations are not 100% up there with it.