Realtime Mesh Difference

Is it possable to make a script that would bump out a wall? example:
you have a big plane.
you add a sphere imbedded in the plane.
can you subtract the sphere from the cube to make a crater?

No. And I don’t know of any commercial engines which have this capability either.

in scorched 3d, the explosions leave blast holes

The mesh is probably just adding 1 vertex, or is just stretching existing vertices.

Games with deformable terrain usually have some sort of algorithm that defines the terrain’s surface rather than using a mesh. I think scorched 3d even uses voxels, which make this even easier, as it renders everything as 3d pixels instead of only rendering polygons. In blender, you can affect vertices in realtime, although it is somewhat hard to do, and it wont change the collision shape of the mesh. So if you make a hole in the ground, you would still be able to walk over it as if there wasn’t a hole there.

Check out the python docs for info on how to do this:
http://www.blender.org/modules/documentation/pydoc_gameengine/PyDoc-Gameengine-2.34/index.html

Personally, I would make one mesh that is the flat plane, another mesh that is the cratered plane, and use a replace mesh actuator to switch them.