Rather than "Blocking" and "Muting" think of "Voice" and "Visibility" by context
Many social networks seem to gravitate to a model of "mute" and "block" as a means of content and privacy control. I prefer to consider this in terms of aspects granted (voice or visibility), and context in which they're granted.
In particular, @ello is replicating G+'s error in how muting is implemented. If I mute someone because I find their posts annoying, and they're still allowed to comment on my own posts, then they can conceivably write tosh or trash that I'm not going to be aware of. Provide notifications for all comments on my own posts.
Additionally: I'd suggest thinking of this not as "blocking" so much as "voice" and "visibility".
If I give post voice then I see another person's posts. I've found that I'm relatively stingy with this due to the noise problem. On G+ there's the added issue that "+1 shares" (where another Circled person's +1'd a post get placed into my stream) appear. Some of those are OK, most aren't. I strongly suspect Google did this to deal with the "dead stream" problem -- new users get little or no traffic. For those of us who curate our Streams highly, it's mostly an annoyance.
If I give comment voice then I will see another's comments in others' posts. I'm generally more free with this.
If I give own comment voice then I'm enabling a person to comment in my own posts. Because moderation is a bitch (particularly with Ello's broken notifications), this is something again that I allow on a more limited basis.
If I give notifications voice then I'm allowing a person to generate activity notifications in my own stream / Notifications pane (when that exists).
Messaging voice would be another permission granted for private messages.
If I deny visibility (block) then I'm hiding all my activity (but not the fact of my existence) from another person. That's a need expressed by some communities on Ello and other social networks (most notably recently the alt sex/gender community of far too many initials). For the most part, this is overkill for my purposes. I'm not overly concerned with whether another can see what I post, but there's a lot that happens online that I'm really not interested in seeing.
In terms of controls and presentation, I'd like:
The permissions to be visible on the user's profile as I view it. I can rapidly tell if a user is or isn't voiced, blocked, or muted.
Where the user is displayed in content. I'd like to know, again, if someone is or isn't friend/noise, and how I've voiced or denied voice. Reddit provides elements for indicating friends and other elements (via RES). I should be able to change those settings from that context and not have to navigate to a new page.
An overview permissions-oriented view. I should be able to list all my voiced / unvoiced / muted / blocked users. Preferably in some sort of full-viewscreen grid/table view. Please, oh please, oh please, oh please, oh please, oh please do NOT replicate G+'s utterly fucked up animated graphical circles representations, or the teeny tiny non-searchable modal dialogs for blocked/muted users (I've got several hundred or more of the latter, I can view them ... 5 at a time. Looks like around 500 blocked and 75 "ignored" (that is, "muted" -- the terminology isn't even consistent). Hell if I can effectively manage them via those interfaces. Date on which they were blocked, post or comment from which they were blocked, and possibly a field for additional explanation or a tag for reasons (e.g., spammer, troll, shill, idiot, ...) would also be useful. Oh, and try not to export that to just anyone via JSON file.
Most systems seem to operate around "mute" or "block". Some (reddit) don't allow blocking of individual users (the idea is that conversations / threads are a collective good), but allow muting of any notifications and personal messaging. Reddit (with the browser extension RES) does allow for tagging of individual users. I find this useful to note specific domain experts, trolls, generally clueful, proponents of specific concepts or technologies, or otherwise memorable people.
Related would be whitelist / blacklist / greylist notifications, where actions are specifically allowed, specifically denied, or unspecified. An activities greylist can be useful for determining who to add to either a white or black list.
And since I don't work in marketing, my terminology's clunky, but I think the ideas might be useful.
Ping @budnitz (who seems to have mass-muted everyone?)