Obviously I don't work for Jagex any more, but I can give some insight.
In order to do this properly Jagex would need to remake a whole load of assets, last time they did this it took a team of artists and developers 12 months plus to do it. Having this toggleable would also mean there would be an increase in the amount of work needed for each update (eg making sure everything works in both options) which will slow down how quickly updates will be delivered.
Of course, if there is a technological solution (ie something clever that just makes it work) then I am sure Jagex will snap it up. However every attempt to improve the graphics with this method has hit one of two problems, firstly the z-buffering issue (the graphics processor deciding which parts of a model appears in front or on top of another part of the model) is not professional enough to be used as a commercial product and/or the amount of processing power needed to be used requires a super high end PC.
From a commercial point of view, I cannot see this being a massive driver in new players coming in, or a great improvement in retention (although I am sure there are some people who will come back or continue playing because of an update like this). So from a cost point of view, I cannot see this happening unless a technological solution is viable.
Of course, this may have changed since.