This has been proposed by a couple of users (mostly me). I feel that Blockland should get re-coded on GarageGame's new Torque engine in the near future, right now I think Blockland is at a very good state. First off, Blockland has many limits due to the current game engine such as, Datablock limits, brick limits, and memory limits (both for hosting and 32/64bit support).
Besides the limits to Blockland things like physics and rendering can be revamped with the new engine. Physics right now are currently client-sided, meaning we can't interact with the bricks after they get fakekilled. The Rendering right now does support dynamic lighting but only with the remove of terrain.
Here are some major advances Torque 3D offers:
Rendering*
Per-pixel dynamic lighting
*Reflections*
Scattersky system for sun, stars and skies
*Extensible shaders (GLSL / HLSL) (Ambient Occlusion shadows and also shadows that will be in v21)
*Screen Space Ambient Occlusion
*Lens Flare/Corona Effects
*Powerful fire, smoke, and explosions particle systems 
Physics*
Actual Physics with PhysX (No crappy client-sided physics) (PhysX is not required but it comes with Torque 3D, other 3rd party physics libraries are supported)
*Physics support for older hardware and mac
*Cloth dynamics (imagine moving hanged shirts moving)
*Destructible Objects and Joints
*Buoyancy (YESS!) 
There are many more features in Torque 3D, I am simply displaying the physical features
(I did not go over lighting). The many more features included, and are more for the programmer (Badspot).
You can see more features here
http://www.garagegames.com/products
