Modeling, not making your models work in game. Milkshape is so limited and U never really seen much come out of it. Blender on the other hand can dish out a Milkshape model easily.
It ultimately comes down to the modeler's knowledge of the program and how good he is at it. For all intents and purposes, MS3D does an excellent job as a modeling program for blockland when used by someone with some competence, same goes for Blender.
Saying one program is better then the other for a game like blockland is kind of redundant, since the only thing that matters as far as the program is concerned is whether it has access to all of the game engine's intended model features, like animation and advanced parameters. Sticking a bunch of polygons together, which is essentially what blockland demands out of a blocky model, isn't exactly modeling-intensive in any sort of way.
