Imagine Minecraft 2...

[Requia]

Probably should go with a custom engine optimized for voxel specific stuff and obviously for the specific platform.
That way you can start doing really long draw distances, have dynamic voxel sizes, smooth terrain, combine blocks into complex objects and apply Newtonian physics, obviously built in advanced editors/mod tools and a dedicated content distribution site.

Are we talking really long distances (longer than Skyrim)?,because I'm pretty sure the latest consoles could handle a Minecraft 2 instead of locking it down to only PC (Which I guessed right off the bat).

It's an OS issue more than a hardware issue. Minecraft treats the save file as a virtual memory, which couldn't be done on the 360 thus limiting the game to the amount of land that could be loaded at one time. having.. I think 4 gigs available to gaming? some fraction of 8, makes it bigger, but the OS issue has to be solved to get the whole 8 times the size of the earth thing down.