So use gibless models.
It's possible, with some fancy optimisation techniques, scaling of the player etc.
I'm not saying it would be easy, but Source could handle it.
Edited:
The maps would be limited though and not nearly as big as minecraft maps.
The scale of a max-size source minecraft map vs. minecraft's max size in pixels (4,294,967,296^2) wouldn't even be visible unless you zoomed in 1000x or more. It's possible with lua to make minecraft-style gamemodes with more than 2048 blocks though if you use some heavy lua scripting.