I don't know much about text-mode, but I wonder if even there it might
make sense for ' to have syntax class `punctuation' instead of
`word'. Probably the answer is "no", or that would already be the
case. ;-)
I see this in `text-mode.el':
;; We add `p' so that M-c on 'hello' leads to 'Hello'
;; rather than 'hello'.
(modify-syntax-entry ?' "w p" st)
That explains why p was added, but not why ' should have syntax class
w at all. Again, there probably is a good reason, but I don't know
what it is. After changing the syntax to punctuation, M-c still seems
to act as desired on 'hello'.