My guess is that 99% of users are quite happy with the existing option: 'Insert Photo or Video'.
If iOS provided yet another menu option 'Insert something else...' that could be a problem because the user would then be faced with choosing exactly what he wants to insert, and how he can make that choice. Picking a photo is easy, as they are highly visual by nature, and the phone comes with an inbuilt photo picker. One that doesn't rely on filenames that would confuse the average user.
iOS doesn't want you to know about files, even though objects may be physically stored as files somewhere, and that's unlikely to change.
iOS could provide an additional 'Insert something else' option to the menu, but in order to support that, the user would then be required to select an application type, and be able to invoke the application's 'object' selection user interface.
Say you wanted to insert a Pages document. You could pick 'Pages' in a drop down list, which would fire up Pages document selector (this would not be the same as the selector you see when you open Pages) and choose the relevant document name. Pages could in theory be redeveloped to support this.
But...
What happens when you have hundreds of apps on your device, and many possible document types? The app selector itself could be an issue, as a series of names in a list would not look good. Probably a no-go on Apple's part; that's why we have screens of icons on show when the phone starts up.
Let's plod on anyway...
Then, you would need support of all your document-centric apps to provide you with a document selector. Let's say I have an Astronomy app and I want to attach a horoscope (which happens to be represented internally as XML). Oops, 'Gimme My Future' has just let me down because it doesn't have that select-only UI that it's published as an interface. OK, 'Gimme My Future' and a million other apps do the right thing and get redeveloped....
All of this to keep 1% of users happy who want to add a document to an e-mail reply? I really really can't see it happening.