Yep that's an awesome feature. I just don't let the young ones play online, but if they want that group experience then the siblings can all play together but not with the public. Pretty cool.
I've been known to waste some time on a midsized MC server and the solution there was volunteer moderators and a willingness to ban misbehaving users. Watching chat also helps, since the dong-builders are also likely the ones being inappropriate in chat.?
Umm... I was going to say something to the effect of how it isn't technically an instance of the halting problem to detect penises in Minecraft, but it's pretty close in the face of a hostile adversary.
Then I remembered that with redstone, to say nothing of command blocks, it really is close to the halting problem. Maybe not quite technically, since the detection program would be running in a context with significantly more resources (halting problem in the strict sense applies to Turing Machines with infinite resources), but it's still close enough to cause you a lot of practical problems, enough to say that it's probably an instance in practice even if not in theory.
The problem is it's 3D. It'd have to check from every angle, or all you achieve is that people get "creative" about arranging layers at different distances that'll line up when you approach it from the right direction.
That's the basic problem of the MMO approach, rather than Minecraft's ad hoc and persistent private servers.