Well, you mostly reiterated what I have been saying.
It's their server, and that is OK! I moved to a different instance already which is also good since I don't really have any part in their communities any more. That is just healthy for everyone. (These cross-instance conversations are an exception.)
Blocking and censorship is not what I prefer, but if the admins want to block people with red hair (as an example) they can. It's their perogative.
I mean this in a kind-hearted way: Users and moderators can be treated a bit like children. If instance rules and guidelines are consistent and applied equally across all communities, then that creates a healthy environment for all communities to prosper. Lack of consistency creates uncertainty which is painful and limits development. ("Development", in this case, means Lemmy in its entirety.)
In summary: If the admins want to block or limit activity, that is fine. The admins should adjust the guidelines accordingly and make that public information. If they choose not to do that, users and communities should move to other instances.
While I don't know why this specific community is moving to another instance but I can speculate about the reasons why.
This is basically just another Ma Bell shuffle, me thinks.