I believe in general: The more freedom you give a player, the more code you need, or at least the harder it is to code.

The idea is good, however, and a good physics engine might solve part of the problem.
I doubt very much anyone with our resources could do this.
I agree very much with Muhsin: Do your planning beforehand. Think about the systems you need (chat, login, account management, resource mining, building. Art style, deforming of objects - you cannot possibly know what forms the players will want/need the resource to be in -, physics engine, master server, movement/position updating, user interaction, trading system graphics settings, menu, will there be a politics system). Write them down, plan for at least a month, then decide if it's possible or not. Get someone experienced with multiplayer code (I believe the art is easier to get and less important at first).

The idea of few limits for the players is always good and fun, but, as I said, I believe it doesn't make things easier but harder. Plan this part very throughoutly: What tools does the player need/want to do anything he can do? Hammer/Nail? Electricity? Nuclear Power? Clay? Wood?