One of the reasons for me being here in MT is the Opensimulator project, essentially what MT is to MC, OS is to SL. (Second Life). :)
I liked the OS concept, because of its "homebrew" mentality, and because of the shear potential that the software enables. I grew bored, however, because for creativity, there is just so much effort needed to pull off anything worth actually "immersing" oneself in, without either paying for content, hiring someone to create content, or learning how to create the content at lightspeed.
For me, MT offered the option of generating the content, with simple media options. I stay, because Lua is a far better scripting choice than a built in, rather limited, "proprietary" language. While there is certainly limitations with the engine, in regards to things like the node size, I gotta admit, I like the more natural looking views that I can generate with MT, that I could never pull of with OS.
OS can create "regions", areas of specific sizes, say 256x256x256 meters, but each of those spaces are limited by the number of objects that can be contained within them. In MT, all the trees in a 1sqkm area are freely roamed within, even at high view distances, when in the same space in OS, this would tax even the best of graphics cards.
I bring all this up, because somewhere in the future, I'd like to see the two projects come together in a meaningful way. MT can generate, process, and render laaarrrrggggeeee amounts of data. OS has alot of the "server" characteristics, graphics engine code, and other attributes that actually make it the best direction to take any new consideration of MT.
As a side, it's possible already to do what you are asking. Nodeboxes can be used in ways to make this possible. I've previously considered looking at the dig code, to see if I could somehow alter the active node, so that as I dig, parts of the node are dug away. Instead of animating through the crack animation, the node could be swapped with a "dug on" node, where a random amount is missing. This idea could easily be extended to simply separate the selected, or active, node into say, 8 nodes, (2x2x2). If you only deal with the active node, no engine changes are necessary, at least not so far as addressable space.
I like the idea of nodes being smaller, as you have laid out. It's one of the reasons I created a Shapes mod, to handle creating nodeboxes for a variety of nodes. Perhaps the above idea could be implemented for a usable mod, and simple nodeboxes used for simple divisions otherwise. The 2x2x2 square from above is essentially the stair block, so the inner, outer, stair, and slab blocks already represent 4 of the 7 nodeboxes needed for this. The only ones remaining also already exist in the moreblocks mod, as nodebox definitions, so the only effort would really be to handle to the active block, so that it can be divided at dig time, instead of cracking, or something like that.
Just be well aware, nodeboxes cause lag. This is the central reason I quit building nodebox styled architecture. It looks great, but lags like ......