Unfortunately I seem to have chosen an abandoned or dormant account for my test, so I can't say for certain whether posts will show up in Home, but I would expect so given the other visibility changes. Hopefully someone else with some fedi experience can chime in.
Now, if that increases or decreases the problem space is a philosophical question. I personally do have issues with blocking instances as a whole because one admin disagrees with another admin on unrelated issues.
If I get denied access to other people to organise around, e.g. building our own zen retreat because my admin and their admin disagree on political factions or because one admin nuked the connection to another instance for not being trigger-happy enough against their own users, everyone loses. Such technical possibilities and - in fact - recommendations run against the ideas of a civil society.
I would prefer to use an instance that has no control over who I can follow. As an added benefit, this instance wouldn’t have to fully federate with every instance I follow users from, so wouldn’t add all updates to the federated feed.
This way the instance would only be responsible for user identities but would not have much control over who its users can follow. I still don’t fully understand why Mastodon did not choose this design.