Originally posted by Hiryukaen:

Yes this is still the case.
This will probably always be the case. It's an intended feature. It's the same decision as why devs have disabled building inside caves/dungeons.

If they allowed you to make a "hobbit hole" you now have a base that is invincible. Same with building into dungeons and caves.

If this were to change, you'd also have to expect mobs to be able to alter terrain (not just destroying breakables like rocks) and ignore the current spawn rules which prevent stuff from spawning near specific player built objects but instead they would spawn because of the player built objects.

Otherwise there is no challenge with minimal investment.

I guess i didn't think of that, which makes sense of course. you don't want everyone making underground bases even if its PvE.