Well, this technically is quite possible from a programming perspective. Arno's excellent ModelConverterX comes quite close to this, and I have in-house code that I am currently working on updating that comes even closer. Although you obviously can't get an exact representation of the original source file (as many of the original modifiers are tossed out during the compile), you can get enough information that editing is quite possible.
It seems to be more of a moral issue. It seems like whenever visual model decompilation is mentioned on here or avsim there are many who react quite negatively, fearing there work will be decompiled, stolen by others, and redistributed in a somewhat modified form for profit. Honestly, in my modeling experience, it would take more work to completely modify a decompiled model enough to make it indistinguishable from the original than it would to just write your own model from the start.
A few years ago I announced on here that I was working on putting my model decompilation tools together into a usable package of tools and releasing it. I got flamed by a few people who seemed gravely concerned that everyone would start stealing other's intellectual property and such. Many people on here seemed to think this was a good idea but I feared the few who spoke against it and I never released it. I was too worried of the legal ramifications of doing this, as someone threatened me with such.
So now I will reopen this question. Does anybody have input on whether this would be a good idea or not? If I was to release tools that would allow a .mdl to be edited in Max (or FSDS, however I am not as familiar with it so I don't support it yet), would people in the community revolt or view it as valuable? Would the people on here who keep asking for such a tool use it for legitimate, copyright-respecting purposes? I don't mean to start a war on here or anything, but I would like to hear a rational discussion about this. And please, let's not start talking about anything illegal, I don't want this topic to have to get closed.