It actually does
As long as there is no nuke bunkers, 50% of all units will be killed, and the other half will be damaged. If you launch a second nuke, then something insane like 95% of all units will be killed, and the rest will be on less than 10% health.
Drop 2 nukes, and the desired effect will be achieved.
[Edit]If you want 1 nuke to kill all units... then that is insane!! Imagine that YOU are not first to ICBMs / Tactical Nukes... then you couldn't attack any nuclear-capable civilisation. Any, and all, stacks that you send at them will be wiped of the face of the earth as soon as it approaches your borders!! And that civ can just waltz through your empire without a care for the world, as nukes are rather cheap (About twice as expensive as a Modern Armor), and 2 of them can kill any stack.
Its a balance thing, and if you can have either balance, or realism, but not both, then I congradulate Fireaxis for choosing balance. As an unbalanced game is no fun to play.[/Edit]