Impressive. And now I'm wondering if a Minecraft inside Minecraft would actually be realizable. As 8bit CPUs have already been made (altough with unknown architecture), it is a bit less crazy to imagine running linux with a java stack on it. It will be hellish slow and you probably need some sort of "hardware" graphic acceleration. And a lot more memory than the current versions. But hey, running Minecraft in Minecraft would be pure brainmelting awesomeness!
Maybe some sort of Hardware Description Language to Minecraft compiler would be useful.
Normally, Minecraft logic requires some time in-game to execute, but last year (IIRC) someone was able to invent "instant" logic gates and transmission wires, by exploiting some unusual interaction between pistons and the block-update rules. They're quite bulky, but they do get the job done of achieving FTL communication and supertask computation ;).
With an optimizing compiler to take advantage of these, it might not be unrealistic to implement Minecraft in Minecraft. The real-time speed would only be limited by the real hardware, not by the Minecraft hardware.
Maybe some sort of Hardware Description Language to Minecraft compiler would be useful.