Correct: user blocking is quite strong. Community blocking similarly does exactly as you would want - i.e. those posts no longer show up not only in your Subscribed feed, but the All one as well.

However, instance blocking does not block the vast majority of content from the instance - i.e. it’s nowhere close to either a personal defederation (as people begged for and were told to wait for Lemmy version 0.19 for it to be added - in contrast, most instances now are on 0.19.5 and 0.19.6 is being tested on a few) - nor is it even as strong as user blocking.

Plus it has been actively weakened over time, i.e. somewhere between 0.19.3 and 0.19.5 users from that instance can now trigger a Notification to you by replying. I note that this is what almost made me quit Lemmy altogether, when I replied to a comment in a post in ChapoTrapHouse@hexbear.net, and then did similarly somewhere in lemmygrad.ml. Each time those replies kept coming for literally WEEKS and WEEKS, long after I had stopped responding to them - and each time from a new person, at which point how do I stop them all!? They spam-bombed me, not for writing a post, but replying to a comment that I encountered by browsing All. And not from a hexbear.net account - i.e. where I could expect to have read through their quite special rules, but on Lemmy proper that have rules like “remember the human” - unless the person’s account is on hexbear.net or lemmygrad.ml I suppose, which is why Lemmy.world has defederated from them. However, my much smaller instance (StarTrek.website) had not, and unlike the desktop the mobile site lacks the description of the community rules (PieFed does this, as well as instance “labels”, and tags, and community categories and so much more, and I think that’s amazing! It really helps clarify any potential misunderstandings, e.g. if you reply to a post on beehaw then you should make extra certain to not be a dick, or you should expect your content to be removed, and possibly be banned as a result - i.e. if you refuse to control yourself then they will do it for you, to give their own users the experience that they desire in their community on their instance as they see fit).

One more thing: some apps - I’ve heard that Connect and Sync do at least - provide their own form of instance blocking, separately from merely turning on the Lemmy poorly-named feature.

Sorry for the rant, maybe some of it was interesting.:-)

TLDR: you are correct, and if only the instance blocking would work in the same manner that would have been wonderful! Sadly, it does not.