It is using vertex lighting; you have enumerated the problems with vertex lighting. Good work.
Unfortunately, prior to now, I've had no knowledge or experience with "vertex lighting", probably because the only other engine I have experience in is Source, and Source does not use Vertex lighting (come to think of it, I don't know anything else that does).
Lightmapping the whole world would not be "a moment of lag", it would be minutes of agonizing delay for every single person who connected to a large server. It would require much more RAM than most people have. It would also be very problematic if someone made a bunch of bricks with lights that turned off and on.
So this gives us a choice - spend a lot of effort adding fancy new lighting only some users will be able to see, or focus on adding fixes and features that benefit everyone. Or in the case of lightmapping, features that would actually make the game worse for everyone.
Now, lightmapping: There's a term I understand. Source compiles times are the largest for lightmapping, using two executables to calculate it and taking the quite a lot of time on larger maps, it can't be done dynamically, so I can see where the problem lies. Anyway, isn't it at all possible to correct some of the problems with vertex lighting without trying to render lightmaps?
Also:
Not only is Blockland self-aware, why is there an option to turn vertex lighting on if it's already "on" anyway?
