I wanna see instances federated with most instances now that in individuals can ban entire instances. I know theres still some instances you want completely blocked from the off tho.
Do instances want to remain legally protected by blocking all those instances?
I think a perfectly acceptable line to draw is "Is it reasonable to expect a large majority of the people on this instance would want this other instance blocked?" If the answer is yes, block them. If somebody has a problem with that, move to a different instance.
The whole point about federation is you are welcome to find another instance that shares this view!
Personally, I don't want to stumble onto CSAM or racist shit and have to block those instances myself. (It's exhausting enough blocking the hentai and furry communities as it is!)