add custom data attributes to block from block configuration page Here is what I would like to accomplish:
 1. Add data attributes to block (for example: data-key="value")
 2. Nice to have: add a text area to block config page where i can enter data attribute key-value pairs (one per line) and have them added to the block.

Any guidance is greatly appreciated
You will need to create a custom block using hook block info, hook block view and hook block configure. That last hook will let you as a form render array (see drupal form api).

The custom block system in drupal 7 isn't very good. If you need anything but the simplest HTML code then you should create your own blocks using the above hooks.