Well I'm not using level-blocks in WED. I'm only using models for my whole levels. (some models have static-lightmaps)

I didn't test it, but I'm pretty sure just setting the LevelBlock's material to the lighting-shader won't work.
I've never written a shader for level blocks, but I think they work different.

If you want to use LevelBlocks you have to use the standart lighting.
The default engine lighting for level blocks shouldn't be that bad.