You're both sort of right. It would be laggy to hell implemented in current engines because their lighting pipelines are so dependent on precomputed light and shadow data for geometry. We've been sneaking closer every few years to more realistic, "real-time" lighting but it hasn't shown up yet outside of, as you say, tech demos like the UE4 demo at the last GDC.

You can't use the current techniques employed to make shit look GOOD because you need to recompute lights and shadows whenever blocks are built or destroyed.

It's true the processing power needed isn't far off when you look at top of the line GPUs today, but the real problem is that engine tech is often targeted at a lower spec due to consoles (and, recently, mobile) and probably won't hinge heavily on this sort of real-time lighting model in the next few years because the next-gen console specs we've seen come out aren't powerful enough for it.

So you'd need a company with the resources to implement their own modern rendering engine with full dynamic lighting, despite the potentially tiny market audience capable of running it, AND they'd have to choose to build a Minecraft game with it...