Using PvP to defend against PvE actions relies on ones opponent also engaging in an entirely optional play-style.
Yes and its a bad system. You said yourself that BGS warfare is a form of PvP, allowing it to happen from solo or private modes is a contradiction. Solo and Private play should be for that very reason, not conducting hostile actions against others.
Bounty cap: it's 1M Cr. because players were colluding to generate large bounties to be harvested.
Offering rewards for any PvP encounter that is meant to be contested is open to collusion by players - hence fewer PowerPlay merits being on offer for CMDR kills in comparison to NPC kills.
I'm aware of the exploits, but there are better ways to go about fixing them than throwing the baby out with the bathwater. Capping credits and merits is just a low-effort, poorly thought out way to deal with the problem.
Here's an idea of how bounty hunting for example could be rewarded better.
The block feature would seem to be necessary from Frontier's perspective - see Sandro's posts on the topic.
Again, low effort. They never consider how these mechanics will be used by players to avoid gameplay consequences. Why not require a report for instance blocking? If the reason is not valid according to the logs then it should be limited to comms.
Piracy in general or PvP piracy?
Both.