Reviving the topic: I’ve been thinking about this last night, and thought of a way in which it could be possible with the current limitations (given someone’s willing to make a very complex script).
You would create a single flat plane and subdivide it multiple times. Then create an empty and give it the needed logics and properties. On another scene / layer, place multiple references of that empty wherever you want. A script would then contain information that would detect those empties, and map the subdivided plane so it stretches every 4 empties, each empty representing a corner (or map it every one empty and have it represent the center).
When someone would dig a hole in the terrain (or place a lump), a new instance of that empty would be added / removed. The script setup (however it would be done) would spawn a copy of the subdivided plane with the proper position and rotation, and offset the vertices so they transition between the gaps. If done properly, this could allow a minecraft-like environment with smooth terrain.
Even better, this could all be done with a subdivided cube, each of the 6 faces being a separate object (so they can be removed by the script). Each cube would be spawned at an equal distance from the other, but the visible sides would be smoothed by the script, while sides hidden under the terrain would not be rendered to avoid performance loss. Whenever a cube is added / remove, the nearby ones would be recalculated to smooth around the hole / lump.
Anyone tried this so far or is willing to try it? I’m barely learning scripting in BGE, so no chance for me to achieve something this complex. Might be an interesting test for BGE.