Kind of reminds me in some ways of the TermKit 'proof of concept': http://acko.net/blog/on-termkit/
These kinds of extra-helpful term emulators seem like the natural progression of auto-completion and all the other goodies people love about oh-my-zsh. Once someone gets this right, it will seem silly to use a 'dumb' terminal in a graphical environment.
The separation between shells and terminals is a good thing and should not be ignored. New features should be added to shells, and only if necessary, we can add new features to terminal emulators to support those shell features. Many, if not most, of those supporting features are already in terminal emulators. For example, every single modern terminal emulator supports mouse input (pretty much by definition): this could be used by shells if they were so inclined. If you want to add some sort of menu-based completion that supports mouse selection, great! The shell is the correct place to do it. Want to display some images or vector graphics? Some terminal emulators will have your back even in those situations, though support for those things would need to be more widespread before that stuff could really be used properly.
Talking specifically about TermKit: If I'm on a Mac using Terminal to access the local shell, why would I care if the features are coming from the shell itself or the Terminal app?
Of course it would be 'better' or more 'proper' if all the functions were built into the shell, but like you say, it takes widespread adoption. I don't see what the problem is with starting to add features to your terminal and then let the good ones trickle back down into the shell as they become widely adopted.
Seems like a confusing nightmare, but I'm not fundamentally against it.
This one look nicer. At least it doesn't make the error of the previously mentioned attempts like trying to create a custom shell instead of using regular ones. Nor it does screw up existing workflow. As for trying to understand the terminal content, it is a "challenge" and I don't think it is a good idea as it will remain command specific and it has been proven to be a problem in the past, and it still is.