When blocking an instance it blocks the instance of the poster (which is correct), however the toast message says it has blocked the instance of the community. Gave me a bit of a panic as I thought it had blocked a large and popular instance rather than a spam domain!
I’m seeing the same!
Maybe I should add this as a setting but the current behaviour is it blocks posts inside communities of that instance and comments from users of that instance (depending on your settings) but not posts to communities in other instances from users belonging to the blocked instance.