Nah, you don't need to exploit illegal blocks to get this to happen. Here's my steps to reproduce:
1. Enable grid snap
2. Spawn a Teleporter and Fire Turret blueprint
3. Move one end of the Teleporter onto the base of the Fire Turret's orb
4. Enter play mode and enter the Teleporter from the other end
5. Once you've gone through the Teleporter, enter Edit Mode
~~~ From here you can enable the drawplane to observe that you're at a very high (or very low - it could be negative) height ~~~
6. Open your Inventory, and place either a model or logic box into the world at this height. Note, you won't be able to see what you placed.
~~~ With a water box, you'll encounter something Peaceful Player discovered - you'll be able to jump in midair! ~~~
7. Reload the project
8. Upon rejoin, spawn a new model to the game. Can be any size, and you don't even have to edit it.
-> You will no longer be able to collide with any terrain block or model that previously existed in the project. You'll only be able to collide with new models that you create from this point forward. This exploit does progress into a published game.
Here's a quick video of it as well (:
Edit: This video now comes with post commentary! (: