sandstone does drop currently, and is usable for the level up requirement (or atleast for me) try using the ones obtained from dungeon crates or purchase some at the auction house
by killing mobs in the mine-world you can get dungeon crates which can be used on the dungeon crate at the mine-world spawn :D its very rare so it may take a while to get :(
i had this issue before the new season but now its fine, could be a bug, try using sandstone (enchanted g-apples) that are from the dungeon crate, or buy some off the auction house,
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