Well there have been a number of PnP RPGs that have approached the subject with various degrees of success, and I could see it being done with an MMORPG. Heck we've even had computer RPGs like "Xenogears" and "MS Saga" that have approached the issue, not just with upgrading gear, but even changing entire suits and their specific components (arms, legs, weapons, etc...). I could easily see it being done.
The big questions of course come down to whether or not someone can come up with the budget to do it right. See, doing stuff with sword and sorcery is not only pretty straightforward as far as conventions go, but you've also got thousands of games to draw upon for inspiration (or just steal code and ideas from). What's more it's so stereotypical that guys doing the pre-made engines like "Unreal" probably put some thought into "how will we make this work for people who want to build Sword and Sorcery games for it?".
With a Mecha-Game your basically looking at someone creating an RPG engine almost totally from the ground up, which also means it's not going to be as polished looking as yet another derivitive game. Your also not going to be able to yell "Havoc Physix!" as a way of justifying how awesome your physics are going to be (translation: someone made a good
physics engine, I'm using his, instead of worrying about making my own).
Also I'd figure that to do it "right" you'd probably wind up wanting to focus on both people (the pilots), and the giant machines themselves. That is how it is in a good mek-wank. That means designing what is probably going to be two co-existing engines.
This gets back to the question of "why haven't we seen a science fiction game, where I can both fly a ship planet to planet, mine astroids, and do stuff out there, and then land on planets and do normal adventuring?". The simple reason is that it would involve designing TWO entire game engines, and then spending more time to splice them together. Basicaly twice the development, coding, graphics, testing.... etc.. which would then be being sold as one product. Star Trek Online is so far the only game I've seen even making pretensions of setting all this up from the beginning (and arguably the only game to do it at all was Star Wars Galaxies, and the space stuff there was a cruddy cockpit shooter).
I mean it could be done, and would probably attract a definate, reliable niche audience just by it's nature. BUT it would require a big budget and a producer willing to settle for a slower return of their money, and less potential profits, than they believe they can get by producing a derivitive WoW clone.
