I really like the idea of using WASM for application "plugins". You can pick your implementation language, and with the right runtime, it can be speedy and secure. Seems like a win.
The blockers, to me, right now are:
1) I mostly write Go, and the Go runtimes didn't seem to be particularly maintained when I last looked. So it just hasn't been worth it to me to do plugins. (I have done "provide your own code to a Go application" before -- "gojq" and "expr" got the job done. Less features than a full WASM runtime, but still pretty powerful.)
2) It's unclear to me which programming language APIs should target. You add a plugin system and you want developers to use it -- what are the popular languages that target WASM? Go and Tinygo look great here, but I have a feeling that the average programmer wants something a little more dynamic for their small plugins. AssemblyScript obviously wants to be the standard, but it's probably too different from Typescript to make it a no-brainer for Javascript developers. Some sort of Perl/Python/Ruby that compiles to WASM would be great, but I haven't seen much progress on that front.
As for running untrusted code in general, I don't think WASM needs to block you. gVisor simulates the linux kernel for containers, providing stronger isolation between them, and is designed to protect you from things like this. (I think the original usecase was running ffmpeg to transcode user-provided video files?) And you can always go full VM on these things. Or take the nuclear option -- carefully audit the untrusted code and build up that trust ;)