The only reason I see for physics in Blockland is for building vehicles out of bricks and then driving around in 'em. Actually, I'm not sure it'd require that much fiddling with physics, mainly converting bunches of bricks into a part of a model or something on-the-fly and then applying some basic form of animation on it.
Actually, it'd be nice to have improved collision detection between bricks and vehicles and other stuff like that.