You cant say that terrain is better, or blocks
(or models or Sprites)
It really depends on the level:
Indoor Shooter Level:
Big elements like walls : use Blocks
Small elements like barrels and switches: use Models
Outdoor Shooter Level:
Use Terrin as basic lower boundary
Models fro Trees and plants
Models for Buildings, or Blocks for Buildings, depending
on how much work you want to put into collisiondetection and
shadow methods
"Space Level"
use Models for everything, and Sprites for some
cool light effects.
etc...
all Entities have their use.