It is using vertex lighting; you have enumerated the problems with vertex lighting. Good work.
Specifically, lighting is only calculated at each vertex and interpolated between; if the vertices are far apart the approximation is bad and it looks weird.
There are many other fancy lighting technologies out there. They all require faster, newer, and better video cards. Many Blockland users still have old, slow, lame video cards, and would not be able to use them. Most of the time, vertex lighting looks good - specifically it only looks bad on these very large bricks.
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.