My understanding is Space Engineers takes the "blocky sphere" approach mentioned early in the post, works around the "walk along its surface" part of the problem by making gravity direction point towards a fixed point, and bypasses the "trying to build 'upward'" part of it by not allowing voxel construction. It doesn't use a quad-sphere at all.
Correct, which is why I said they didn’t go half as far as the OP did. Most stop at quadsphere after realizing their blocks are no longer square.