No, they have different teams that work on different aspects of the game. Some people think that creating new content uses 100% of turbine's work force, so they don't want any distractions whatsoever.
If they had it their way, all Turbine employees would be chained to their desks, working non-stop on *new content*, with 3 breaks per day for energy drinks.
An analogy would be hiring someone to build you a brand new house in one month, and your main concern is that the house is complete. But when you visit the construction site on week 3, you find that they are working on yard sculptures that you didn't even know about, and the house hasn't even been painted yet. Some people would love the yard sculptures, some people would hate them, but as the paying customer it's up to you if they go there or not.
Since this is an MMO, it has many customers with many different tastes. Ultimately it's up to the development team to work on what comes down the pipeline. The issue with grass isn't game breaking, and they are in the process of working on update 2 and probably 3 as well, so I don't see this happening anytime soon.
Game breaking no. Obviously "not" adding grass is not going to break the current flow of customers, or cause anyone to leave, myself included.
It would however impress the hell out of potential new customers to see screenshots of lush immersive environments 100 times more amazing than the average MMO, thus increasing sales and customers.
And yes, I believe that simply adding grass would make that much of a difference as to how awesome the environments would look. That is why I posted the screens for comparison. The graphics in Oblivion are not better than DDO. They just have grass in the screenshots, which is making it look far more realistic and immersive.