The reason the CoD4 game runs so smooth with little hassle and hardware trouble is because it's a revamped CoD2 engine. And due to the engine's age, it has quite a few limitations (map sizes is likely to be the top reason). While there are a couple of maps that seem fairly large, the general playing area within the CoD4 maps is small and compact (see Pipeline as example).
As to why Infinity Ward doesn't license their engine out, you can speculate on a few things. For starters, it has limitations and isn't very flexible. Its design is very specific and not generic like Unreal Engine. The Unreal Engine was designed to be flexible in molding the game to do what you want it to do. This is largely in due to how the UE engine was fundamentally designed as well, with various support libraries and feature drivers in order to accommodate today's trendy technologies (shaders, bumpmapping, EAX, etc.). Because of the way UE was designed, many have licensed that engine to build their game around it. Of course, even UE has its limits (see TRIBES: Vengeance) and flaws. But weighing in all the pros and cons, many considered UE to be the most versatile given the vision and ideas these game developers have.
id Software's doom3 engine shares some of the problems that many engines have: map size. While the game itself is visually impressive with respect to lighting, the developers felt that the way the engine was designed cannot cope with the vision that they want to realize: large area, detailed structures, intricate facial animations.
Valve's Source engine pretty much changed the way characters move and animate. It's all nice but I kinda wonder if the engine is too complicated for developers to use or something else. There aren't a lot of titles today that uses the Source engine these days, as everyone is trying to come up with that one big title that will spring them forward into fame. So it's a mystery why there aren't many developers using Source engines.
There's also DICE/EA's Frostbite engine that powers Battlefield: Bad Company. Too bad there's little detail on it. The engine in BF2 and 2142 might have been decent enough to accommodate large detailed area and I could almost envision a TRIBES-like gameplay. Alas, the engine itself doesn't seem to be very robust. For one reason or another, it may have been a decision by DICE/EA to not license their engine out.
CryEngine2... Ouch... The pain... 'nuff said.
Is IW's engine underrated? Probably not. The main thing one has to consider is that engines need to suit, mold, accommodate, and provide all the necessary features in order to make a vision realized. It has to be easy to understand, have the kind of support you'd expect from an engine developer, does not cost oodles of dollars, and isn't overly complicated to use. When you factor all that in, would the engine IW used in making CoD4 be good in other gaming applications as well? Sure it loads maps fast and is light on the system.. but is that enough?
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