I've wanted something similar but not as in-depth as this for some time now:
Basically, the idea is that it would essentially be a "dungeon creator." You'd be given a small set of tools in-game which would allow you to create your own smaller-scale map - mostly consisting of basic rooms and hallways attached to one another - that would pretty much amount to a customized dungeon. You could add different kinds of mobs to the dungeon, choose a theme that corresponds to the types of enemies encountered, and even design bosses with basic mechanics like void zones, stacking and soaking.
Not only would it allow for players to practice mechanics for actual raids via something smaller-scale and more customizable, but you could earn rewards - such as gear, currency, etc. - from it that increase in amount depending on how many different mechanics you have for each boss; so for instance, defeating a custom boss with five mechanics would give you more rewards than a boss with three.
In terms of how it would work from a story perspective, just say that the heroes stumble upon some sort of titan-based training facility that allows for very realistic combat simulations.
Definitely yes.
Just like Warcraft 3 had custom maps, players could create their own quests, puzzles, dungeons, raids, battleground and arenas, using existing assets, for other players to test and enjoy.