Would be a great idea but it would take a team of atleast 100 people to develop this game. That is if you want it in the next couple years.
Really?If you split up the work between let's say 15 people, 5 doing the map and 10 doing to coding, I suspect it wouldn't take more than 4-5 months, or is there something I'm missing? All the work after the map was done, and the code was created, would be adding the mode into the game (a week, tops) beta testing it (okay, maybe a month if it was buggy) bundling all of the basic weapons and vehicles ( a lot more than what's packed with the download now, maybe a week as well) and then finally, doing a dry-run with the server. (let's say a 64 person server, the only one that's open at the time, and then everyone gets in for like a week and builds and tests out all the systems, as mentioned above, a week.)
On top of the 4 months needed for the map and coding, we have... 5 months and 3 weeks.
In regards to the lag, I believe that most of the trouble is the result of the host(s) having a terrible internet connection. Something along these lines would at the very least need broadband, but with a dedicated server and an upgraded connection you could support up to 32 players.
This would, of course, require some financial investment of Badspot or maybe a fund drive to get money donated to buy a large-scale hosting server, I'm sure it would require at least T3, which I believe is a little bit under 50 Mbps, while broadband is anything over 768Kbps.
What you would need to do something like this and have support for a large number of players (in theory, every single person who has the ability to play blockland online) is like one of the servers that runs a large online service, like MapleStory or Second-Life.