So, I remember something like that (with the core OS) from when they announced they will be producing Windows Phone devices. But what does that mean, is this still valid with Windows Phone 8 and why aren't they doing it then?
TBH, I am not 100% sure it is still valid. The last time I discussed this issue (unofficially with Microsoft employees) was back in January. It was valid then (for WP8), but anything can happen in six months. However, Nokia has many reasons not to modify the core OS directly themselves, and I doubt those have changed. I'll give you just three:
Cost of reassigning responsibility:
Google delivers to OEMs a pile of source code. However, Google isn't responsible for the OS functioning as intended on any device. They make it absolutely clear that any bugs are the OEMs problem, not Google's.
For WP the exact opposite it true. It is MS' responsibility to deliver a reasonably bug-free OS. Failing that, it is MS' responsibility to fix OS problems. Here too the situation is clear. This is part of what justifies the cost for a WP license (we could dispute that this cost is justified, but that is the theory).
As soon as Nokia starts modifying OS code themselves however, the boundaries between Microsoft's and Nokia's responsibilities are blurred.
If Microsoft's engineers spend three weeks tracking down a bug, which they determine was caused by one of Nokia's modifications, should Microsoft be reimbursed? If so, then at what cost? What if Nokia discovers a bug in Microsoft's code, which is only revealed by one of their own modifications? What if Microsoft's engineers determine they could have tracked down the bug in half the time (which is likely since they developed it) and think it unreasonable to reimburse Nokia for all their efforts? Literally thousands of different and difficult situations can arise, not all of which can be forseen...
Anyway, in a nutshell, this is entirely unworkable for software development. In this situation someone must take full responsibility, and just as with Android, this would have to be the OEM: Nokia. Obviously, this would incur a very significant additional cost to Nokia's WP development efforts...
Cost of merging OS versions:
Delivering updates to existing handsets is a rather costly business for Android OEMs. Imagine a code base with millions of lines of code, in which an OEM made thousands of modifications. When Google delivers a new version of Android, OEMs must reapply all their modifications to the new code base. Although much of this can be automated, many situations remain in which people must undertake extensive reengineering efforts to correctly recombine the two. Retesting is also costly.
WP OEMs are spared such expenses, because they are neither able nor required to modify the OS themselves. Obviously, if Nokia decides to start modifying OS code themselves, then they are sacrificing those savings...
Nokia's (or any other OEM's) ability to request low-level OS extensions
Nokia has no reason to do any OS modifications themselves. Whenever they determine that the OS wont let them do something, they just call up the WP team, explain what they need, and let Microsoft add in some extra flexibility for them.
This doesn't mean that Microsoft develops Nokia's features for them. It just means that Microsoft gives Nokia more extension points, where Nokia can add their own processing to what the OS already does, but in a way that allows them to specify that extra processing in their own firmware... without having to modify the OS. This is so much simpler and cheaper than digging into the OS code, that doing so really just would be stupid.