There is definitely room for innovation in the blog tools/publishing/server space, the big question for you to be comfortable with is whether or not the space is big enough for another player.

I launched a new blogging platform in the early 2000's and despite some really cool new approaches to how things got done, it was really hard to turn these innovations into a winning business. I think there's probably enough room for 1-2 players of any size, and currently, Wordpress, Tumblr and a few others are doing a great job serving the market. Don't hear me as saying you don't have a chance, just hear me as saying that even if you do bring some compelling innovations to the market, it will be a real fight for you to win appreciable marketshare, and even then, you'll have to figure out how to make money from it.