I think the "fi" is the preoposition that goes with the verb baaraka, and that it can be left out in the translation. I think it does mean and say that the earth is blessed.
I could not bring myself to believe that any part on earth be more blessed than any other part. It is like prophets, all are one and have the same dignity, their degrees refer to their specificity for the mission they are entrusted.
So also any part of the earth may be specifically blessed for a particular purpose or in a certian connection, but not in any aboslute sense to be more blessed than other parts.
RED: I can not agree with this. There is a reason why FI is used. Without the FI (thus "wabarakaha") then it means the whole earth. With the FI I think it says "He putted blessing in her (her is earth)".
GREEN: I understand what you mean but I think there is a misunderstanding of what the word Baraka means. First of all we have to define what the word "Baraka" means. If we like to translate it as "blessing" then we have to define what blessing means. In a sense one can reason that every thing created by Allah is blessed simply because it is created by Allah. But I do not think this is what Baraka means. I think a person who has baraka is a person who has "fruits", other people can benefit from him/her. A person who has not Baraka, is a dead tree or tree with rotten fruits, other people can not benefit from him/her. Same with the earth, there is beneficial earth and there is dead earth or earth which is inaccessible.
7:137 وَأَوْرَثْنَا الْقَوْمَ الَّذِينَ كَانُوا يُسْتَضْعَفُونَ مَشَارِقَ الْأَرْضِ وَمَغَارِبَهَا الَّتِي بَارَكْنَا فِيهَا ۖ وَتَمَّتْ كَلِمَتُ رَبِّكَ الْحُسْنَىٰ عَلَىٰ بَنِي إِسْرَائِيلَ بِمَا صَبَرُوا ۖ وَدَمَّرْنَا مَا كَانَ يَصْنَعُ فِرْعَوْنُ وَقَوْمُهُ وَمَا كَانُوا يَعْرِشُونَ
I think this verse makes it clear that there is also earth which has no Baraka.