I need to be able to have multiple blocks inside the same 16x16x16 area. They will all "fit" inside based on their bounding box, but obviously forge/minecraft wouldn't like this too much because basically everything is done based on the BlockPos, and having multiple blocks inside the same block would cause issues; my question is, is it possible to somehow circumvent this restriction and have multiple smaller blocks inside the same block? 

Are you trying to do something like MicroBlocks?

 

Or possibly Red Power's fractional blocks (I can't remember exactly what they're called, but they went down to 1/2 size in all four dimensions, iirc)

 

This is going to be difficult to do.

I am trying todo something like microblocks, the general Idea is to make tech blocks, like for example a generator. And every tech block is going to have upgrades that you can place on the block, and then it do whatever feature is related to the added block. I'm also considering making it an Item instead, and just do special rendering if the new state is detected based on the item being right clicked onto the block. what are you're thoughts?

Sounds like a use for the submodel system.

https://mcforge.readthedocs.io/en/latest/models/blockstates/forgeBlockstates/#sub-models