I tried to get single player infinite flat worlds released for the last 360 update, but there were still too many things that didn't work properly, and there were more pressing things that needed to be fixed so I put it aside (again).
I say "particularly multiplayer", but really, there are still a lot of things that don't work properly in single player too. Let's just say there's still quite a bit to fix before it's releasable, even for flat worlds. But Infinite flat worlds will be a priority after multiplayer is released.
infinite worlds is already built into the game without mods, wouldn't it theoretically work online?
Online as in multiplayer? No, there are significant technical hurdles to get it working well in multiplayer. Mostly RAM issues for the host, but some others too. PC 64bit (via monogame) will fix the RAM issue.