Well, each has a different purpose, as I understand it.

Models are usually (USUALLY) used for organic and detail items. Characters and things that need to be animated should be modelled. This would include trees, fire hydrants and objects that you manipulate. They can be quite irregular shaped and detailed, and render quite fast if you keep poly count low.

Prefabs are used for doors or other level geometry that moves, or for windows that break. They are basically little tiny levels made up of blocks with assigned actions that mimic animations. Since they are pre-rendered, they are almost as fast to display as models.

Level blocks are used to confine and divide space, saving render time by isolating the view. They are slower to render as they increase the math required when calculating the view. Blocks are better at defining areas than models, as they have a very self-contained bounding box, improving collision detection. Models tend to have collision hulls that do not conform to their shape (like a great big square that encompasses the whole model).

This is my understanding. Could be wrong. It has happened at least once before...

Cheers!
Mark