Many reasons why.
1. Bad Idea. If you interviewed every fan of Pokemon 90% would not want this. 5 Regions is way to many. No more than 2 are ever needed. I really only like one, but GSC,HGSS made 2 work.
2. It would take years and years to make and in that time they could have made multiple games.
3. Why would you want all POkemon obtainable in one game. It ruins the point of the GTS and trading in general. Pokemon was created for trading, as Xander said.
4. Level cap will stay at 100 as it needs to. Raising it would be pointless. Level 100 or 500 will still have advantages and disadvantages.
5. Level distribution would not work. By the second region you pokemon would be maxed out and it would no longer be fun.
6. It would be incompatible with all other games. If you raise levels to 500 that would make it unable to trade with any other game.
7. It would cost a lot. It would take a ton of time and money to make this game and GF would be forced to sell it for more than usual. Probably about $60-$100.
8. That is what hacks are for. There are many hacks out there where you can catch all Pokemon with no trades. If you want the "ultimate" game, just go and play a hack.