I'm dipping my toes in to design kits to see how I fair, but before I get to far my main concern is if the tool can handle creating an 'massive' procedural generated world (akin to say minecrafts procedural generated worlds).

I've looked at UDK but get the impression it does more "level" based maps in that they are more a limited arena to generate content rather than an ever expanding world.

Apologies for the amateur terminology but any recommendations would be appreciated.

Budget-wise I'd prefer to look towards the more affordable/free options, at least until I've built up a confidence in my abilities to use a kit to produce something world while.

You need to be more specific, there isn't a single tool (engine) out there which is able to handle every kind of massive procedural generated worlds. E.g. there are engines which supports massive space scenarios, others which will define large world on an abstract level (minecraft like) and others which are more useful for level based games. But a level based game could be a zone based game too, which would give you the option to use large worlds.

Either the massive space (can you clarify that one?) or most likely the abstract level.