Factions does not exist to serve roleplay whatsoever. It never has, and it never will. The rift between roleplay and gameplay (not necessarily PvP) is the fact that gameplay inherently enforces itself at all times. This is the reason why there are rules against jumping around the place in Regalia, because in *real life* people don't jump up and down on tables just because they are bored, but they do in *Minecraft*.
Also, in my time off the server (roughly two years), I have very much enjoyed recontextualizing Factions as something else, but I think that even calling them "Kingdoms" is a bit broad for what you get. I prefer contexualizing them as Settlements. And a particularly large faction could be seen as a Town (sort of like the plugin Towny), and a massing of "Towns" wouldn't be an empire, but more of a County. My example of this gameplay-to-roleplay weirdness is: If the ENTIRE server joined my faction, I would call it a small city.
To the question asked in the original post: What is the purpose of Factions?
To protect your buildings and items from griefers and thieves. Anything outside of that purpose is entirely up to the owner of the faction, and/or it's members.
And as for the last post, Minecraft is most definitely a block game.