They’ve done it. Took a rat’s lung down to its scaffolding (collagen and connective tissue), put it in a bioreactor to simulate uterine conditions, and then inserted stem cells from a newborn rat. The cells somehow migrated to the proper places and grew into the appropriate types of tissue. The lung was then transplanted into a rat where it respired as hoped quite nicely for an hour or two. The artificial rat lung was said to perform 95% as effectively as a real lung at exchanging oxygen and carbon dioxide.
They noticed a few issues—in particular that blood clots formed in certain spots. The conclusion was that this was not an insurmountable obstacle; it would just take more research.
And another lung front (same link, further down), a Harvard researcher put some lung cells on a flexible chip and got it to mimic some of the functions of a human lung. The hope is that we might someday be able to use this kind of chip to replace some of the animals currently used to test the effects of environmental toxins or inhaled drugs.
Stem cell research is beginning to reveal the miracles of natural healing we have always been intended to discover. It’s a wondrous time to be alive.