HTML content in emails is the real WTF. I wonder why no-one ever invented a nice markup format for email? Probably because the only type of person qualified to do that wouldn't be seen dead sending non-plain-text email.
Which is ridiculous but strikes me to be done so as to ensure that emails prepared in MS Word render correctly in Outlook?
Of course they could fix MS Word's HTML output and fix Outlook to use MSIE's rendering engine ... but that'd only reduce lockin by allowing Outlook users emails to be read properly in other MUA. Never going to happen.
The compose window of Outlook is WinWord. Outlook (up to 2003) used Trident (Internet Explorer engine) to show HTML-mails. Nowadays Outlook HTML view is powered by Word layout engine as well (for security reasons, as MS said). It cannot handle many CSS style elements, background color and is stuck with HTML 4.
Outlook 97-2013 use Word for the compose window. It's not an option, it's how it works behind the scene (Win32 COM components).
e.g. an known Outlook 2010 bug (with Exchange 2013) crash the Outlook client on startup. But you can still open *.msg files, it opens the mail in a window and one can edit the mail.
It's all about Bill Gates vision "information at your fingertips" from the early nineties and the Cairo operating system.
Outlook 97-2003 has it as an option, 2007+ don't. And BTW the Outlook 97-2003 and 2007+ implementations of this feature are different too (MS split most of Word into wwlib.dll in Word 2007).