The original Equation Editor was licensed from a third party (Design Science), and it is possible that Microsoft never had the source code. Maybe the third party vendor lost the source code, but I think it is more likely that getting the third party vendor to fix the bug would have required negotiation with that vendor, and maybe Microsoft and that vendor were having trouble agreeing. (This is speculation on my part, I have no inside info.)

Or equally likely, that vendor no longer exists.

Likely, perhaps, but not true, since they still exist: https://www.dessci.com/en/

Microsoft probably started wondering internally why they don't just write their own equation editor, but didn't have time, so decided to do a crazy patch to this one and then start on a rewrite.