Level 3
riiiight... I'll not go into the details of each point on this because it's kind of pointless me saying what's been said before but your wish list only really caters to a few genres of game. As someone already put it, you couldn't even create a pool game within it.
A better analogy would be the transition between LBP and LBP2. The former was really only any good to do platformers. Sure there were a few novel examples of people breaking outside of the box with very clever thinking, but the tools simply didn't allow you do do much more. A little like the suggestions in your engine, which for the most part would only allow you to make character based 3rd person action/combat/driving games. How would I use your tools to do something as simple as OXO (noughts and crosses), or more complex things like a match 3 puzzle game or tetris? It seems you have a very specific game in mind that'd you'd like to play, but this is not really the ethos behind LBP.
The biggest fundamental change LBP2 brought to the table was the host of logic chips, that are a cleverly disguised form of visual scripting language. I've used a few professional game editors in my time with this same functionality and I can tell you that the chips system is almost identical to Kismet (in Unreal engine) Uscript (a plugin for unity) and FlowGraph (the same thing again in Cryengine). Graphics aside it will let you do a massive range of things. As inspiration have a look at some of the arcade levels in LBP2 (here's a quick plug for mine http://lbp.me/v/x92qw0) which have collections of games with huge variation in play styles and genre.
The second point which has been pointed out is one of scale, memory and performance. Yes something like GTA3 can now run on smartphones, however it's been highly engineered and tested so that when a little block loads in you don't see the massive holes in the environment as one part streams into memory and the next streams out. Sure you could give the player occlusion tools and to some extent try and have a system in place which does this for you (I’m sure LBP optimises and culls physics, lighting and geometry that's not on screen somehow), but it would be a huge task when you start introducing massive varieties of assets into one small area. Have you ever noticed in something like GTA or Just Cause that when you get in a certain car more of those cars begin to appear? Something like GTA uses a lot of smoke and mirrors in order to achieve this feeling of vastness. And it's done in various ways - through clever art, level design and code optimisation.
The next and probably biggest problem is one that I think you'll probably dismiss straight away. You want to create a large open world game with loads of content. Rockstar North is a studio with around 200 developers working on a game for 3-5 years. Even if you just took the level design team you're still looking at a team of probably 20-30 professionals working at least 8 hours a day 5 days a week for 3 years to populate the game and make it fun. I can see the average user created level from your game being incredibly boring and extremely unpolished, and therein lies the main problem. No one would want to play it.
There are games out there already on console that might interest you though, which have level editors, Far Cry 2 for example, will allow you to build levels using its very functional editor and add in AI spawn points etc, and I believe Infamous 2 has a mission editor that allows you to set up various scenarios.
Or if you're serious you could try your hand at UDK (the free version of unreal engine). It's very versatile and if you've already got a grasp on the concepts in the chips of LBP2 (which judging by your language you don't) you should already have a grounding in kismet.
I completely disagree though, that LBP2 or LPB vita don't allow you to make complete games. As is so often the case with creativity, the only thing really restricting people's imaginations is their lack of tallent.
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