Yes, pneumatics can lift things, but they are very hard to get precise control with.
Direct acting gear motors would probably be best, with some kind of absolute encoder on the moving arm to know how far it's moving.
How far do you need to lift blocks?
Let's assume you can get away with a 30 cm arm. A .5 kg block would then exert 15 kgcm of torque, plus weight of arm, which is reasonable working load for an existing servo like the RX-64 or MX-64, and maybe even MX-28.
Another option would be a simple DC gearmotor with a high gear ratio (like Pololu 298:1 DC motors) and an encoder you build yourself, plus a motor driver and a microcontroller to close the loop.
