I don't think WoW would have any problem supporting every player on the same 'realm', but the client might have some problems. From my experience, most of the players are concentrated in the major cities (Orgrimmar, Undercity, Stormwind, Ironforge, Shattrath, and Dalaran). I play[ed] on a low-population realm, so other servers might be completely different. I guess it doesn't really matter for the sake of the argument. Anyway, even with the low population on my realm, the major cities consistently killed my FPS; I could not imagine having every bored player in the entire game hanging out in Shattrath. Plus, the chat channels would be even more clogged. On my server, there's always off-topic chat going on in trade (and that's about the only thing really), with every player it would be impossible to read anything before it gets scrolled away.
WoW just isn't designed for large amounts of players in the same place. It would require a complete overhaul to both the server and client sides to keep the game even remotely playable with the huge amounts of players that this would entail. It's just not feasible.