Here’s what the sixth MLA Handbook for Writers of Whatnot (2003) says about blocking quotes:
If a quotation runs to more than four lines in your paper, set it off from your text by beginning a new line, indenting on inch (or ten spaces if you are using a typewriter) [ . . . ] (3.7.2, p. 110)
A typewriter! In 2003!
Chicago is more generous:
A hundred words or more—or at least eight lines—are set off as a block quotation. (11.12.)
For institutional reasons, grad students in English tend to be slaves to MLA—its handbook it certainly a hell of a lot shorter, even if it was last updated in 1965 and has nothing useful to say about citing “electronic” sources.
The very fact they are called “electronic”—what if you want to cite your Roomba?—tells you everything you need to know about MLA-la-land.
The rules are for close readers. You don’t need to quote more than four lines of text if it takes you a page of analysis to explain why Blake’s symmetry is all “fearful”—hell, it took Northrup Frye an entire book. MLA wants analysis so close it’s practically microscopic, and microscopes make it science, right?
Here’s the thing. I’m writing about Proust right now, or should be, and Proust can’t write a prepositional phrase shorter than four lines—even eight lines is pushing it. So I end up doing one of two things.
1. I perforate my essay with block quotes, leaving great gaping gobs of white space that shout “look at me! I’m not offering useful analysis on this page!”
2. I break a 189-word sentence in 4-word chunks and pretend I can hang my argument on those chunks.
Over to you, dear commenter: do I give up the façade of close reading and quote the occasional word to prove the book I’m writing about is the book Proust wrote? Or do I surrender close reading altogether and talk about books wholly in theoretical terms?

As another MLA slave, I’d caution against ever completely abandoning one form of analysis for another. And while a paper looks a bit odd when there are long indented quotes, I find they are useful because you can cite an important passage and then continue to do a reading without having to constantly cite, basically putting all your quotes together. You also get the added benefit of allowing your reader to see the actual shape of a passage on the page, which is nice for poetry.
And hey, if you check out JSTOR, all the ‘big deals’ do it, so that means it must be good, right?
The big deals on Proust, at least those I have read, tend to fish about with tweezers until they pull up just the right symbol, and then you get a dozen pages on the “little phrase” or the glace-bonsai.
So far I have used your Big Honkin’ Quotation system, though there are times that method could be better served with a sort of two-column running commentary.