> Where did we get this idea that federated instances should never block anything?

I'm not sure, but the OP was postulating that Forgejo instances could federate to solve the problem that the Dutch government runs its own instance to develop its software (including using AI extensively) but wants to engage with the wider community so is currently hosting things on Codeberg's centralised instance of Forgejo, and Codeberg's administrators hate AI.

Adding federation doesn't solve that problem, it just moves it one level up. To collaborate with the Dutch government, you either need to directly register on their site, or set up an entire copy of Forgejo, publicly hosted, so you can federate your one-user instance with them, or you need to find a different instance that someone else hosts, and be at the mercy of that instance's admins, who may be even more cruel and capricious than Codeberg's.

What I predict is a future codeberg.org/about saying

    code.overheid.nl  Suspended (slopfondlers)

And a future code.overheid.nl/about being full of dodgy Forgejo instances that host porn games