The admin does defederate from illegal content and I’ve never heard of or seen pawoo. As for bad faith instances the rule really is as simple as trying to federate with everyone. Every instance has its own federation rules so having one that has almost none isn’t a bad thing.

Did I instantly block exploding heads? Yes, but it’s nice that I have the option because in some cases I want to keep specific areas around. Some communities on hexbear are fine for example, whereas many instances quickly defederated from it. The ability to block an instance from a user level is coming next Lemmy update by the way, it’ll just be a few clicks to hide all that harmful content.