ehhhh, don't throw the baby out with the bathwater! personally i think it makes vastly more sense to federate on a per community basis rather than a per instance basis. an instance is most likely going to hold a vast array of users and topics in an ideal world, in which case the general consensus on what is and what is not considered to be relevant or desirable content for the given group is likely quite difficult-- there's nothing to go on, as everyone's talking about different things and holds markedly different values because of it. But communities? Perfect sense! Every community is about a very specific subject/topic, and comes with a set of rules/values for everyone who wishes to post/interact with it. Once you get to the granularity of federated communities, it no longer feels quite so high handed to federate or de-federate with something, because the general consensus of the community is assumedly much more clear.

Sure, leaving automatic federating up to the client makes sense, but the meat of it sounds like a much better level of granularity for decision-making for something that impacting than it being server-wide...
But perhaps I am simply way off mark. my experience is small, in comparison to my conviction lol.