It moves around a bit, lifting up like a quarter inch - so I believe it comes out! My daughter tugged at it everytime we passed by.
I have seen the one at WDW come out, a child is picked to 'pull it free' and gets a photo and certificate and everyone cheers... but I didn't see that at DLP.
There is occasionally a magic show with Merlin and I believe that one lucky person from the audience gets to drawer the sword out of the stone. I know it ran at the St. David's Celebrations this year and I think during Halloween season last year.
It's an older show that resurfaced during the 15th Anniversary Celebrations.