That's hardly a harsh truth. We use the terminal model because it works good enough and there are decades of software that rely on it. There are certainly other models that could work, but so far they haven't been adopted. I'd love Mathematica style notebooks for my shell work.
Again, don't confuse the shell (command line interpreter) with a terminal with escape codes and the like. Check how 9font does it, you get the rc shell and a few more languages with a REPL (lua ports and the like) inside a graphical window, not by emulating a VT220 terminal running the shell inside. You can freely resize the 9front's rio window manager's windows running rc (or anything else, even games, graphical browsers, images, video players...), copy, paste, cut the text, save the history, grep the contents of a window's text itself and tons more.
You are confusing the unix terminal model with specific terminals. The TTY concept doesn't mandate an 80x24 text only device. Outside of applications that specifically rely upon the existence of a directly addressable grid of characters, Unix TTYs and PTYs would work perfectly fine in a mathematica notebook style interface.