It can, provided your 'known cheater' information is accurate, and you don't have any mutual friends with that CMDR who are present and who could override the negative matchmaking weight of a block.
However, it takes some pretty compelling proof (multiple instances of suspicious behavior with few other rational explanations for the phenomena observed) before I'm willing to call someone a known cheater, and I'm wary of using the block list for any purpose, even against cheaters.
When it was confirmed that the block feature was actually applying instancing weight, I removed all non-cheaters from my list, but shortly after, I decided to remove the cheaters as well. I figured it would be a disservice to others to exclude my CMDR's presence, as there are no subtle cheats that are likely to cost my CMDR any major inconvenience, and I'd like to collect evidence of cheating, if there is any to be had. Besides, instancing is bad enough already; I won't friend cheaters, or go out of my way to encounter them, but I'm not blocking them either.
IP banning isn't workable irrespective of network model, because almost no one has a static IP.
Same thing.
A kick in the rear, for what that individual was doing, would imply a kick in the rear to other cheaters, if FDev's had a remotely equitable system in place.
