It still seems that there is a very simple workaround to your proposed solution:
1. C'log
2. Add Cmdr you just c'logged on to block list
3. Log in and return to the same mode as before, but in a different instance
Please correct me if I'm wrong.
In both directions you are no longer instanced with the CLogging player. I don't think this is a bad thing
The Blocklist, along with the mode select (open/group/solo) is there to allow players to filter who they play with. A CLogging griefer (my main motivation in this thread) probably already has a well populated blocklist, I don't think this makes the situation much worse. And if they block their attacker (who is still in the game, maybe in SC waiting for them) they are blocked from instancing with those the attacker is instanced with.
It's worth bearing in mind that the blocklist is the lowest priority filter too - mode select is top, then your friendlist, then the blocklist. It is a loophole as you say, but imo not a massive one. The ones that don't face their fate cannot do as much more damage. If they keep blocking players they will end up alone in their own instance, provided other players fill the policing role.