We believe that Allah is all powerful which means He can do anything and nothing is impossible for Him. Then why is He unable to take a form?

Well in reality he did, Jesus, known to you as Isa, is the physical embodiment of the Godhead

Allah doesn't cater to what humans want. Humans should follow his will for what he wants you to do. To even say what he is not able to do is a reflection of YOUR own doubts, that betrays your own lack of faith.

Not unable, just not interested.

He's a God, one of many, and we humans are nothing, just a little project, an ant farm if you will. Something to enjoy but not something you cater to. You don't take orders from ants. You don't prove yourself to ants. They're just ants.