In LBP you were stuck with Sackboy and other already created characters, and even though the physics could be manipulated a little, it wasn't to any great extent. Dreams is different. In Dreams YOU create everything, from the character, character animations to the way the character 'plays'. You have complete control over that aspect of the game, unlike LBP. 

I'll remain sceptical until I see created Dreams that actually look like they play well.

Doesn't this look like solid jumping mechanics to you?

https://youtu.be/qyvJv_ZJkPE?t=9m20s

And those are mechanics the creator put together. They can be adjusted in any way conceivable.

It looks okay (but still a bit floaty, which was the issue with LBP), but most of the gameplay clips are so short between minutes of non-game footage that it's hard to get a good idea of how it'll be.

LOL. It's only like that because the creator chose to make it like that. This isn't LBP. LBP had a set jump mechanic with little adjustments and people learned to use logic to change things. THIS is making EVERYTHING from scratch. 

There is no engine that allows for literally every possibility. There will always be some inherent limitations to the engine.

Yes but that limitation isn't to do with jump mechanics. For instance, this creator chose to give the character weight when it landed and even decided to squash the character slightly to emphasise that. Another creator might decide to make the jump and landing lighter or even heavier. 

Like I said, I'm reserving judgement til I see more.

Don't reserve judgement, INVEST, INVEST, INVEST!!! I'm more concerned with interaction and level sizes. I'm not keen on small chunks linked. I'd sooner see large levels linked. If we can only create a couple of minutes of gameplay before we have to link to the next part, I'm going to be disappointed.