I thought so, too, but I've heard enough worrisome talk about how blocking screws up instancing in unforeseen ways that I can't rule it out. Ultimately I don't care if someone doesn't want to play with me, but I do care plenty if by abusing the blocking feature people are messing up my ability to play with the people who DO want to be in the same instance with me.
Ultimately I'm giving Fdev a C- for this feature. I'd sure like it if they'd instead spend time on developing fun mechanics to the actual game.
The Friends List will have just as much influence on your instancing, as the Block List can. If the Block list has to go, it looks like the friends list may need removal as well.