If Capcom really wanted to do it then they would have. They farmed it out because they had no ideas on how to develop the franchise further. They wanted a western influence because they couldn't do it themselves.
DMC 4 had good combat but was the most repetitive of the series.
They wanted a western influence because they wrongfully assumed that would lead to break away sales for the game.
Based on the work done with Dragon Dogma I am fairly sure they could have made it, this is a typical case of a Japanese publisher seeing the success of western games and thinking that to get that success all they need to do is ship t to a western dev.
The biggest issue with DMC 4 imo was the repeated levels for Dante, the combat was so good however that it honestly never bothered me all that much, This new DMC is like I said decent but pretty much the only thing about it that I think is better than previous Devil May Crys is the morphed world aesthetics. Everything else I find to be worse but I'll say however it is Ninja Theory's best game to date.