I didn't say no upgrade route. I said no upgrade route using blocks. You would upgrade using resources, as we do now. I don't see any needed to allow using blocks to upgrade. They are too easy to get from quests and air drops as you level up. Just my opinion on it, though. It would not bother me if it was an option. I just don't see any reason to change how that works.
You never have to rebuild your base. You just grab a hammer or nail gun and upgrade. Pretty easy with a nail gun, imo. You always have the option of creating a new base with blocks if you choose or waiting until you have the higher tier blocks before building, or you can just upgrade as you go.
Game design didn't have to mimic reality at all times. This isn't a simulation. There is no reason why they can't require you to upgrade from wood to cobblestone to concrete to steel as they do now. If you allow directly upgrading from wood to steel, then you eliminate any need to gather materials for the cobblestone and concrete intermediate upgrades, thereby having them pointless. It is the same as the change they are making to get players to actually go through all tiers of weapons and tools and armor instead of instantly jumping to tier 3 from tier 1. They want progression and not skipping stages. This is a good thing.
Using blocks to upgrade with instead of resources is not about the cost of making blocks... You gain nothing by doing it that way. It is about wanting to use quest rewards and air drops (easy to get) instead of gathering resources (time consuming... somewhat - cobblestone is extremely easy to make with little time or effort unless you need a ton of it). Skipping stages of construction is also about wanting to avoid gathering resources and just skipping most of the work. Gathering resources is part of the game and there isn't any reason to remove the need to do so.
And what does a sledgehammer have to do with any of this? There is no reason to destroy blocks when you need to upgrade unless you don't like where the block is located, which has nothing to do with these suggestions.
Steel is really the only upgrade that takes real effort. If you collect all the palettes of cobblestone and concrete (and stone if you want) as you quest right from the start of the game, you should have plenty when you are ready to build and upgrade your base unless you build very large bases.